Store Cards vs. Credit Cards: What’s the Difference?
As store credit cards grow in popularity with both merchants and consumers, it’s important to understand all the details that make up their differences. While traditional credit cards offer some advantages, store cards can be a very appealing option for both merchants and consumers.
Learn more about both credit card types to determine which may be right for your business.
What is a General Purpose Credit Card?
General-purpose credit cards are what people typically think of when they hear “credit card.” These cards are very common and are often obtained directly from a bank or other financial institution. These cards can be used anywhere that accepts the processing network associated with the card, like Visa, American Express, Mastercard, or Discover.
What is a Store Card?
A store credit card, also known as a private label credit card, is a type of credit card that can only be used at the issuing retailer. Brands partner with third-party banks to handle the transactions, allowing their customers to use a credit card to pay for in-store and online purchases.
Store cards also typically offer added perks, like extra discounts, loyalty points, or free shipping to encourage continued brand loyalty among customers. Unlike regular credit cards, however, store cards can only be used at the issuing store and nowhere else.
Pros and Cons of General Purpose Credit Cards
Both store cards and general purpose credit cards have their own sets of benefits.
Pros of General Purpose Credit Cards
General purpose cards can be used anywhere that accepts credit, allowing consumers to shop at many retailers. From grocery stores to clothing retailers to auto body shops, almost every business accepts most major credit cards to offer consumers unmatched flexibility.
They also offer a secure payment method and enhanced consumer protection. Most credit cards have zero-liability fraud protection on unauthorized charges, and credit card companies will replace lost or stolen cards within a few days.
Cons of General Purpose Credit Cards
For those with low credit scores or little existing credit, general-purpose credit cards can be challenging to obtain. General purpose credit cards also often have very high-interest rates, with the average hovering around 19 percent.
Many credit cards also offer customers high credit limits. Because consumers can apply for and use multiple general-purpose credit cards at once, individual credit limits can grow quite high in a short period. In the long run, this can lead to unnecessary overspending and make it easier for consumers to fall into debt.
Pros and Cons of Store Cards
Both store and general purpose cards also have a few downsides.
Pros of a Store Card
Store cards have benefits for both consumers and merchants. Consumers often can accrue points and perks when using a store card, helping to incentivize them to use it for their purchases. From bonuses to store “cash” to extended return windows and free shipping, store credit cards are designed to encourage customer retention and brand loyalty. They’re also typically easier to get approved for, making them the ideal option for those who want to improve their credit score or who have a little credit history.
For retailers, store cards help encourage added customer spending. This not only increases revenue over time, but store cards also have lower processing fees than General Purpose credit cards. As a result, merchants can pay lower processing fees and retain more of the profit for their business.
Cons of a Store Card
Store cards can only be used at the issuing retailer, which limits the consumer’s buying power. Unless an item can be purchased at the issuing store, it’s impossible for the cardholder to purchase it using the store card.
How Does a Business Set Up a Store Card?
In the past, establishing a store card was a complicated process for retailers that involved partnering with a financial institution and a lot of red tape. But with evolving technology, it’s easier than ever before for brands to offer their own private-label credit cards. Platforms like Tandym are created for modern businesses, allowing them to offer their loyal customers store cards—while also keeping their credit card processing fees low.
To get started with their own store card, retailers can request a Tandym demo and learn more about the easy set-up process. Because there’s a no-contract commitment, and it can be up and running in just a few days, it’s a smart and efficient way to help build customer loyalty, increase revenue, and cut costs—all at once.
Get started with Tandym today.
Sources
Chase - Credit card issuer vs. credit card network
Bankrate - Current credit card interest rates
Shopify - 7 Innovative Customer Loyalty Programs and How To Start
