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Give me some credit

Experts explain open loop credit cards are becoming more common

(Matt Cardy/Getty Images)

You go shopping and it’s time to pay. You pull out your favorite credit card, ready to swipe.  And even though your card has one store logo on it, odds are you can now use it almost anywhere. 

This is referred to as open loop.

“With these open loop cards you can use them at any store, so you can use them to buy your gas or your groceries,” says Kimberly Palmer of NerdWallet.com.

Palmer explains open loop cards are becoming more common, “Every day we're seeing companies, stores, issue cards, so Ikea recently issued a credit card. So did Starbucks and Uber.”

She says they can often be richly rewarding, explaining, “Amazon Prime Visa is one that really stands out because you have such a high reward rate at Amazon, also with Whole Foods. And then you also earn rewards when you buy gas, at restaurants. And so that's a huge benefit to consumers.”

The rewards come with cards from stores such as Target to Home Depot, Banana Republic to Kohls.  

Why are stores charging onto the ‘credit anywhere’ scene?

Palmer tells us, “They want to have consumers thinking of them first when they look in their wallet, and when they see that store card in there that reminds consumers to shop at that store.”

However, Palmer warns open loop may come with extra hoops to jump through to earn those bonuses.

A recent survey shows nearly 59-percent of store-brand cardholders were enticed to open the account to get a discount.  And more than 44-percent didn’t know the interest rate.  41-percent admit they spend more to reach the required amounts for discounts or rewards.  And 65-percent regularly carry a balance. 

Palmer says, “You actually have to crunch some numbers and think about does your spending earn enough to justify the rewards that you'll get? Or, would you be better off with something like a flat rate cash-back card?”

But, she says, if you prefer one particular brand these may be exactly what you need in your wallet. “If you're someone that was really loyal to one store and you do so much shopping there, you can probably get a higher rewards rate from using that store's card,” Palmer says.

Another piece of advice she offers: pay attention to the interest rate. 

She explains, “Maybe the most important thing is to ask yourself if you pay off your balance every month, because if you are carrying any credit card debt at all, then there's only one thing you want to focus on, which is paying off that debt.