Store credit cards were originally issued by the stores themselves, and were not quite the same as regular credit cards. In fact, they should more accurately be called “charge cards” because unlike a regular credit card where the credit card company pays the retailer for the item, and you pay the credit card company, store charge cards were simply an IOU to the store. You had the merchandise, and you gave the store a promise to pay for it. For this reason, stores only issued these cards to those with good credit ratings. These cards still exist, and are sometimes easier to obtain than a conventional credit card because the standards tend to be somewhat looser – after all, the retailer is eager for you to have a charge card from them, since it makes them money.
It is more common today to have a conventional credit card tied to a particular retail chain. These are called co-branded credit cards. These cards carry the logo of the retail chain, but are issued by a credit card company, who sets the credit limit – and credit limits on these cards are typically quite low – and does all the administration related to the card, as well as charging the retail chain a percentage of their profits. So the bank is earning interest and fees from the customer, as well as taking a commission and a percentage of the store’s profits. It looks like the big winner there is the bank.
One of the advantages that a store card will often give you is a better deal initially than a conventional credit card. They also may offer an extended interest-free term when you first get the card, or even a large discount on your first purchase with the card. The disadvantages are that store credit cards are only accepted in that particular store or chain of stores, and can charge exorbitant interest rates.
As with all credit cards, your best bet is to know what you are getting into before you get into it, and always use credit wisely.
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