Store cards vs credit cards: what each one costs and where it works

A store card is a credit account you can use to buy goods over a period of time. It works in the same way as a credit card, but it often charges higher rates of interest and can only be used to pay for goods in that chain of shops¹. That single difference, where it works, is what separates it from the credit card in your wallet.

The cost difference is the part that catches people out. Unless you plan on paying off the full balance straight away, store cards can often work out to be twice as expensive as credit cards¹. The interest charged can be higher than on bank loans or credit cards, so it is worth checking which is cheaper overall before you sign up².

There is also a naming trap. A store card is not the same as a store-branded credit card, which carries a shop's name but can be used anywhere, not just in the named store². And not every card handed over at a till is credit at all: loyalty cards collect points and are not borrowing.

What a store card is and how it differs from a credit card

A store card is a payment card tied to a retailer. You can use it to pay for goods over a period of time, and it works in the same way as a credit card, but it often charges higher rates of interest and can only be used to pay for goods in that chain of shops¹. Store cards typically have lower limits and provide rewards for spending with that retailer⁶.

The mechanics are familiar. There are two main types of account: a monthly account, where interest will be charged if the amount is not paid off in full at the end of the month, like a credit card, and a budget account². Store cards usually offer a discount or a gift on the first time you use one, to persuade you to apply¹.

A credit card, by contrast, can be used to buy goods anywhere, including over the phone, online or by post². You can get one from banks, finance companies and larger supermarket and store chains². The card is tied to a card scheme such as Mastercard or Visa, and a retailer that accepts one scheme is often obliged to accept all cards issued by it⁶.

Two other products sit nearby and are worth telling apart. A charge card is like a credit card but its balance must be paid in full monthly⁶. A pre-paid card works in the same way as a credit card, the main difference being that you can only ever spend what you have put on to it⁷. Neither is a store card, and neither carries the same protections.

Store cards can cost about twice as much as credit cards

The headline comparison comes from official guidance: unless you plan on paying off the full balance straight away, store cards can often work out to be twice as expensive as credit cards¹. That is not a small gap, and it is the reason the discount on your first purchase deserves a second look.

Why the difference? The interest charged on a store card can be higher than on bank loans or credit cards, so the advice is always to check which is cheaper overall². Research for the financial regulator found there was some awareness that store card balances were subject to a higher interest rate than credit card balances, but awareness is not the same as acting on it⁸.

The cost of credit generally is not trivial. Credit card fees are over 2% now, according to evidence given to a parliamentary committee⁹. On the retailer side, debit card scheme fees rose by 28% compared with 2020, and debit cards accounted for the majority of transactions¹⁰. Those are costs inside the payment system rather than what you pay in interest, but they explain why credit is priced the way it is.

The practical point is simple. A store card's value depends almost entirely on whether you clear the balance before interest starts. If you do, the discount is a genuine gain. If you do not, the interest can wipe out the discount many times over, and the account behaves like any other expensive borrowing.

Store-branded credit cards work anywhere, not just in the named store

This is the distinction that causes the most confusion, and it is worth stating plainly: do not confuse store cards with store-branded credit cards, which can be used anywhere, not just in the named store².

So a card with a supermarket's logo on it may be one of two quite different things. If it is a store card, it is locked to that retailer and its partners. If it is a store-branded credit card, it is a normal credit card wearing a shop's colours, accepted wherever that card scheme is accepted. The protections and the interest terms follow the product, not the logo.

The same logic applies to other cards that look like shop cards but are not. Best Start Foods, for example, works in all supermarkets or local shops that sell food and accept bank card payments, and can also be used online¹². That is a payment card with a restricted purpose, not a credit account.

If you are offered a card at a till, the question to ask is which of the two you are being given. The answer changes where you can spend, what happens if you do not clear the balance, and which protections apply if something goes wrong with a purchase.

Not every store card is credit: loyalty cards and retailer-branded cards

A loyalty card is not a store card. It collects points or vouchers rather than lending you money, so no interest is charged and there is no credit agreement. That also means the protection around it is thinner.

The difference matters when something goes wrong. Banks are legally obliged to reimburse customers for unauthorised transactions; retailers offering loyalty points are not¹³. There is also no PIN required to spend loyalty points in store, which makes them easier to use if a card or account is accessed by someone else¹³.

Retailers have been asked to make loyalty cards easier to use for people with sight loss. Loyalty cards issued by retailers should follow the guidelines set out in the Code relating to non tactile items, such as font size, colour contrast and matte colours¹⁴. That is a design standard, not a financial protection, but it affects whether a card is usable at all.

There is a third category worth knowing: credit-builder cards. These typically have lower limits, higher interest rates and fewer benefits than a traditional credit card¹³. They are cheaper than high cost credit like payday loans, but they are still a form of borrowing and are not store cards¹⁵.

Store card or credit card: how each one behaves when you pay over time

Both products let you spread the cost, and both charge interest if you do not clear the balance. The behaviour diverges in three places: the incentive to take the card out, the rate you pay, and what happens when you only pay the minimum.

On incentives, store cards usually offer a discount or a gift on the first time you use one, to persuade you to apply¹. Many store cards offer discounts on goods in the shop². A credit card may offer rewards, but the discount is not the reason the product exists.

On cost, the interest charged on a store card can be higher than on bank loans or credit cards². Getting in-store credit usually means paying interest, and it is like a loan, so it will cost more than paying in full¹⁶. The same is true of a credit card, but the rate is usually lower.

On minimum payments, the rules are the same for both. Minimum payments usually only cover the interest and charges on a debt¹⁷. Your credit card company should contact you to warn you of what might happen if you only make minimum payments⁹. You may have opted to only pay the minimum repayment rather than a set amount, which can affect the time it will take you to repay what you owe¹⁸.

One structural difference is worth noting. From 1 October 2021, firms must allocate repayments to the debt with the highest interest rate first and meet best interest requirements when offering fixed instalment plans on credit cards and store cards⁵. That rule helps on both products, and it is one of the few places where store card customers gained ground.

Rules that protect store and credit card customers

Store finance is regulated by the Consumer Credit Act, which is the same framework that covers credit cards¹¹. That gives store card customers a set of rights that have been built up over decades, sometimes voluntarily by the industry and sometimes through regulation.

The best known is Section 75 of the Consumer Credit Act 1974. Under it, your credit card company is just as responsible as the retailer or trader for the goods or service supplied¹⁹. It applies where the cost was more than £100 and less than £30,000, and it does not apply to charge cards or debit cards³. This additional protection only applies to credit card purchases, not debit card purchases²⁰.

Chargeback is the other route, and it works differently. Chargeback applies to both credit and debit card purchases of any value, through voluntary industry schemes run by Amex, Mastercard and Visa²¹. It has no upper or lower limit, but card issuers will still have their own specific rules²². Debit cards also offer chargeback protection on all purchases, but not Section 75²³.

There are limits to all of this. Paying by credit card gives extra protection, which is why it is often suggested for purchases from overseas retailers²⁴. But the Financial Ombudsman Service has warned that refunds are not guaranteed, and that consumers should know their rights before assuming a payment will be returned²².

The store card market has its own history of consumer protection. The Store Card Market Investigation Order bans the tying of payment protection insurance to credit²⁶. In 2010 the government developed, with industry, new rights for credit and store card users to be implemented voluntarily by credit and store card lenders, in response to concern about debt affordability and potential irresponsible lending practices²⁷.

Can a store card lender raise my credit limit without asking?

Not in the situations the rules cover. Firms must not increase, or offer to increase, the credit limit if the consumer is at risk of financial difficulties or has indicated that he does not wish to have any credit limit increases, or declines an offer of an increase²⁸.

There is a second restriction for people who are already using a lot of their available credit. Under an industry agreement, where customers have high credit limit utilisation over an extended period, firms will not be permitted to increase the limit of a customer without the customer's express agreement²¹.

The rules on limit increases were extended to catalogue and store cards, taking effect on 19 March 2019²⁸. So the same protection that applies to a credit card limit applies to a store card limit.

If you want to refuse an increase or ask for a lower limit, you can. Providers do not have to give you a credit card in the first place, and your application may be refused if your credit score is low or you are not on the electoral roll¹⁴. But once an account is open, the limit rules run in your favour.

Stuck in persistent debt on a store or credit card

Persistent debt has a specific meaning. Only making the minimum payments for over 18 months can mean you are in persistent credit card debt⁴. The rules only applied to credit cards at first, but now apply to store cards and catalogues too²⁹.

Since September 2018 the FCA has told lenders they must contact customers in persistent debt, initially for credit cards and later for store cards and catalogues³⁰. If you are making minimum payments to your credit card, store card or catalogue account, that is the trigger for help³².

The consequences escalate if the situation continues. If your account is suspended, you will not be able to borrow any more money, and if you have a credit or store card, the card will no longer work²⁹. There is an exception: firms may retain the customer's card use where suspension or cancellation would have a significant adverse impact on their financial situation, for example dependence on the credit card for essential living expenses such as mortgage, rent, council tax, food and utility bills²⁸.

Store card debts sit in a particular category when you are sorting out your finances. Credit cards, unsecured loans, store cards and unsecured overdrafts are usually non-priority debts³⁴. Payments to credit cards, unsecured loans, catalogues, overdrafts and store cards are not seen as priority payments³⁶. Non-priority debts include credit card or store card debts, catalogue debts, unsecured loans, unpaid parking tickets, and money owed to family or friends³⁷.

That does not make them unimportant, but it changes the order in which to deal with them. Using credit cards, store cards and short term loans to cover daily costs can quickly turn into long term debt³⁸. If you are in that position, free help is available from MoneyHelper, Citizens Advice, National Debtline, StepChange and Business Debtline, and from local services such as City Advice, which covers everything from credit or store cards to council tax arrears, mortgage problems, court fines or bankruptcy³⁷.