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[Update: Some offers mentioned below have expired. You can view the current offers from our partners if available here — Discover it and American Express Blue Cash Preferred.]

With the holidays right around the corner, many of us will be heading to our favorite stores to begin buying gifts for friends and family. Some experts are predicting that retail sales could increase 10% in 2016 compared to 2015. It also could be the strongest year since the end of The Great Recession.

There are two things that we can expect to hold true from past years. Retailers will be offering deep discounts to get you in the store, and once you’re there they will be pushing their store credit cards as a means for payment. In fact, a 2014 study by Credit.com showed that nearly 30% of all shoppers actually feel bullied by cashiers to apply for the store credit card in order to get a discount. While not all store credit cards are bad choices, some of them tend to have drawbacks.

The Downsides of Store Credit Cards

1. High Interest Rates

When you are in the checkout line, the cashier is going to be talking up the 10% you can save on your purchase when you apply for the store’s card. What they aren’t going to mention is the high interest rates that come with many store credit cards. While you should always do your best to pay your balance in full each month, sometimes carrying a revolving balance is unavoidable. The higher the interest rate you have, the more expensive your holiday gifts will become.

2. You Could Receive Less Benefits From Your Card Use

With a store credit card, you are usually limited to just the purchases made within that store. It’s also likely that the card will have a pretty low credit limit — sometimes as low as just $250 or $500, depending on your credit score. With such a low credit limit, you won’t see much of a positive effect on your credit utilization ratio, how much debt you’re carrying versus how credit has been extended to you. In fact, by using a store card with a low credit limit, you could actually raise your credit utilization ratio, which could negatively impact your credit score. Remember, it’s generally recommended your keep the amount of debt you owe collectively and on individual cards below at least 30% and ideally 10% of your total limit(s). If you want to keep tabs on how your spending is affecting your credit, you can check two of your scores, updated every two weeks, for free on Credit.com.

Alternatives to a Store Credit Card

Regular credit cards are almost always going to offer more value than a store credit card. Here are two credit cards that would be great alternatives and perfect for this year’s holiday shopping.

1. Discover it

If you are looking for a card that can offer cash back on your holiday shopping, then the Discover it card (see full review here) is for you. You will earn 5% cash back on rotating categories each quarter. Sometimes it might be at gas stations and other times it could be at restaurants. For the remainder of 2016, you will receive 5% back on up to $1,500, when you shop at Amazon.com, department stores, and Sam’s Club. For all other purchases, you will receive 1% back. But that’s not all. For the first 12 billing cycles, Discover will match the cash back for new cardholders. That means if you earn $400, Discover will match the $400 and you will receive a total of $800 back at the end of the year.

The Discover it card also offers an introductory 0% annual percentage rate (APR) for the first 12 months on both purchases and balance transfers. After the introductory period is over, the APR will change to a variable 11.24%-23.24%, depending on creditworthiness. This card also comes with no annual fee.

2. Blue Cash Preferred Card From American Express

If you are planning to do a lot of your shopping on Amazon.com, then you might want to consider the Blue Cash Preferred Card from American Express (see full review here). When you apply before January 11, 2017, you will be able to earn 10% cash back on purchases from Amazon.com (up to $200 cash back) for the first six months. In addition you will earn 6% cash back on grocery store purchases (up to $6,000, then 1%).

As a nice bonus, you will receive $150 cash back when you sign up and spend $1,000 on the card during the first three months. The card does have a $95 annual fee. It has an 0% introductory APR offer on purchases and balance transfers for the first 12 months; after that, your purchase APR will be between 13.24% and 23.24%.

Solid Store Credit Cards

If you have considered all the options available, and you decided that you would prefer to use a store credit card, then it’s important you pick one that will offer attractive discounts and rewards. Here are a couple of our favorites.

1. Amazon Prime Store Card

If you find yourself taking advantage of the convenience of Amazon.com, then you might have use for the Amazon Prime store card. With it, you will earn 5% back on any Amazon.com purchase you make. While there is no annual fee for having the card, you will need to sign up for a $99 Amazon Prime membership. As a cardholder, you will also have access to special promotional no-interest financing for up to 24 months depending on the value and type of purchases you make. (Just be sure to pay this off in full by the end of the promotional period; otherwise, you’ll face retroactive interest on the balance.)

2. Target REDcard

Typically when you sign up for a store credit card you will receive a discount that can be used on that day only. With the Target REDcard, you will receive 5% off every day at Target and on Target.com. As a cardholder you will also receive free standard shipping on purchases made online through Target.com. While there is not a promotional 0% interest period, you won’t pay an annual fee and you will receive an additional 30 days to return unwanted items.

The Bottom Line

For some people, a store credit card can be a great way to establish or repair credit. And frequent shoppers who don’t carry a balance may find certain rewards programs beneficial. However, because many store cards can come with high interest rates and low credit limits, it’s important to be cautious. Before you say “yes” to the store credit card, explore all the options available to you and read the terms carefully to be sure a card is right for you.

At publishing time, the Discover it and American Express Blue Cash Preferred cards are offered through Credit.com product pages, and Credit.com is compensated if our users apply and ultimately sign up for these cards. However, this relationship does not result in any preferential editorial treatment.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

Image: BraunS

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