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Is Target's '5% off with card' a good deal?

At 25% interest, a store card doesn't compute if you don't pay it off every month. A check card might be a better choice.

By Teresa Mears Jun 24, 2010 4:02PM

Target plans to give customers a 5% discount on all purchases starting this fall if they use a Target credit card or check card.


Call us underwhelmed. We like Target, but we'd have to get more than 5% back to apply for a store credit card. We'd look more seriously at the debit card if we shopped often at Target.


As store credit cards go, the Target card sounds better than many. You'll get your discount immediately, rather than be rewarded with coupons that require you to come in later and buy something else. But if you don't pay your bill on time every month, the card could cost you more in fees and interest than you save.


As Bill Hardekopf, the CEO of, told SmartMoney:

The 5% discount is generous, but it’s only worthwhile for consumers who already regularly shop at Target. ... And it's not a good deal for consumers who won't pay off the bill in full every month, because the APR, at 25.24%, is comparable to that of other store cards, but nearly twice the national average for all cards.

Store credit cards in general are not a good deal for most people. The correct answer to those pushy salespeople who ask you at the register if you want to save 10% by applying for a card today is "no" unless you are making a really big purchase.

Farnoosh Torabi at CBS MoneyWatch's You're So Money couldn't get a Victoria's Secret clerk to quit pushing the store card until she said: "For what it's worth -- I'm a personal finance writer and I'm no fan of store credit cards. They're not that great." She explains why here.


Leslie McFadden listed the pros and cons of store cards at



  • Discount and other perks.
  • Helps build credit score (for those who don't have a significant credit record).


  • High interest rates.
  • Low credit limits.
  • Lowers credit score.
  • Another spending temptation.

While store credit cards can help young people build credit to the point where they can obtain a better credit card, carrying too many store cards will lower your credit score, McFadden wrote.


Erin Peterson of lists four situations in which a store credit card can be a good move: building credit, making a major purchase, ability to use the perks, and interest-free financing. Sometimes, she notes, you can get the perks with a regular loyalty card.

If you want to compare the Target card with other store credit cards, has a chart. A better way to get cash back is to sign up for a card that offers cash back on ALL purchases. Consumer Reports picked out the best rewards cards this month.


The Target card with a 5% discount is not a good deal if you're going to carry a balance, even for a few months. Odysseas Papadimitriou, the CEO of, did the math for SmartMoney:


Every month a consumer fails to pay off the card, he pays 2% of the balance in interest charges, so after three months of a balance, he pays 1% additional instead of getting a 5% discount.


My view of store credit cards is that they're more trouble than they're worth. I put all my purchases on one credit card that provides a cash rebate once a year. That means just one bill and less chance of forgetting to pay on time.


What do you think? Will a 5% discount persuade you to apply for a Target credit card or debit card? What has been your experience with store credit cards?


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