Why We Got a Target Red Card (And The Dangers Of One-Size-Fits-All Advice)

Perhaps you’ve heard this advice before: Store credit cards are evil! When the clerk at The Gap asks you “Do you want to save 10% today by opening up a credit card with us?” say, “no way, that’s stupid! Saving 10% to pay 30% interest!”

So it might surprise you that Lauren and I recently opened a new store credit card account…at Target.


If you’re not familiar with Target and their card, the Target “Red Card” gives you 5% back on everything you buy. (All the time; not just the day you open it, like a lot of store credit cards.)

Compared to cash rewards credit cards that often pay one percent back and up to five percent back on a limited number of items, that’s a pretty good discount.

And my wife and I do a lot of damage at Target. For convenience, if we can buy something there, we typically do. Diapers, clothes, cat food, toiletries, even some groceries. So if we spend an average of $500 a month at Target (likely), 5% off is $300 a year.

Every time I was offered this card at the checkout, I thought about how the savings would add up, but I always said no because, as a financial blogger, store credit cards are just “evil”. That was ingrained.

And it’s true that these store credit card accounts can be traps. Often times we get them when we’re young and financially inexperienced. We buy $500 of clothes and make payments for a year…at 29% interest. It’s easy to open one at every store, cluttering our credit history and dragging down our credit score.


But just because some of these products are crappy and some people abuse them doesn’t mean they’re always a bad idea for everybody. Everybody has different financial goals and priorities. (And that’s a good thing!)

Unfortunately, so much mainstream financial advice is one-size-fits-all. The talking heads on TV love to preach, “all debt is evil” and “you can’t afford it”. But the truth is, what’s right for me might not be right for you.

Case-in-point: Ten years ago, I should never have applied for a new credit card. I would have maxed that baby out faster than bunnies make babies. I was high on credit and hungry for more.

Today, my spending is in check and I’m in the habit of paying off credit card balances in full each month. So there’s little reason not to get this card and take advantage of the savings it offers. Yes, this card has a fairly crazy APR (22.90%), so anybody who is even thinking of using it to pay off a 60” LED TV over 12 months should get a financial intervention.

But, if you spend a lot at Target like we do, the Red Card might make sense. For those opposed to credit, they have a debit option that simply debits your checking account. You still get the 5% discount and the store benefits because they don’t have to pay Visa or MasterCard’s interchange fees. (And no, for anybody wondering, I’m not an affiliate or compensated by Target in any way.)

What about you? Do you do anything that goes against the grain of cookie-cutter financial advice because it’s right for you? Let us know in a comment.


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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


  1. Great post. I would like to share that I am 22, and until this past August I had no credit cards. Unlike all my friends, my parents didn’t help me get a credit card years ago and I realized upon graduation last May – as I looked forward to my goals of wanting to buy a car for myself and eventually a house – that I was pretty screwed because I haven’t been building credit. I tried to apply for a card at my bank and got denied and knew this would be the case with many other banks. I actually researched credit cards on this website and decided to go for a Chase card…and I was denied again. It was very frustrating but I needed to do something so I decided the best place to start was a store. I picked Target because of the great 5% off every purchase offer (and free shipping online!) and because I shop there often. It was an excellent decision. I was immediately accepted for the card and now I use it regularly and try not to spend more than $150 on it each month so I can pay it off in full each time. After about six months with the Target card I went back to my bank and got accepted for a Visa. Now I’m set because I don’t want any more than two credit cards and thanks to both of them my credit score is now above the median score!

    • Wow, that is a neat story. I’ve found that paying back student loans or keeping them in deferment actually generates a very nice FICO score, over 800 in my case…and with no credit cards. Then again…its an anchor I hope you are not burdened with, :)

  2. First, I have done what you have recently. I have a Red Card Debit card because it is great to save 5% on everything at Target. And you don’t have to worry about paying interest (or for me making payments manually every month). I also have a different store’s card and 2 regular cards. I would think the conventional wisdom that needs to be out there is this: A credit or store card is fine to have, as long as you can meet the requirement of being able to use auto-pay for all your credit cards. This is a good “I can afford it” policy and ensures you that no matter what the interest rate is, you’re not paying it. Even cards at 11% are not a “good” deal.
    Another thing I’ve found is they say not to put monthly expense (like food, gas, etc.) on a credit card. Once again, as long as you can auto-pay it and never have to pay interest, why not get the rewards on those common items (one of CC gets 3% cash back on groceries)…

  3. LOVE my Target RedCard — I have it set up as a debit option, and this is just a no-brainer! Thanks for (inadvertently) affirming the goodness of this card!

  4. Thank you for posting this! I have a Target REDcard and I absolutely love it — though I’ve been given the look of disapproval by some when I mention it. But it saves me money on everything I would normally buy, and the fact that the purchase is made at Target makes it a double plus! You writing about it just confirms it!

    Sometimes it’s too good though…especially with the free shipping! :)

  5. I agree I have the target RED card. The downside is target knows your purchase history. This could either be a good or bad thing!

  6. So what is the benefit for Target if you open the Target credit card and only use the debit option? Do they just hope that you opening the card in the first place means you more likely to shop at Target frequently?

    • You got it. If you have the card, then you will probably go out of your way to shop there over other stores. Since their profit margin is higher than 5%, they are still making money and hopefully your volume of purchases will increase.

    • Danielle says:

      First of all it saves Target on merchant fees. When you pay with any kind of card (visa, discover, master card, etc), even a debit card Target is charged a fee from those companies. If you have a card issued by Target they do not have to pay those merchants, so they are essentially passing those savings on to you. Also, it is an incentive to shop at Target. I have a Super Target right across from a Walmart Supercenter where I live. I have always chosen to shop at Target because it was cleaner, lines were shorter, employees were nicer, etc, but now that I have this card I have added saving 5% as a reason to shop there. My family does all of our shopping at Target. I saved over $600 last year. That may not seem like a lot to most people, but $600 is a nice “Christmas Fund”.

  7. I am 23 and my use of a credit card, especially at my age, may be considered unorthodox or incorrect but it has paid dividends, both literally and in convenience. My parents were both of the mind that you need a credit card early to build credit. I was able to get a student card at my local bank with a $300 limit. After paying it in full every month for 3 years, its limit grew to $3800. My bank was bought out and it was converted to a Chase Freedom. Once I started accruing rewards points I charged absolutely everything, and I still do to this day. I rarely carrying cash and don’t use my debit card. Conventionally a 23 year old is too immature for this but as long as you have the money, the way in which you spend it is totally irrelevant. I recently just bought a new iPad paid for in full with reward points. The next step is expanding my total credit limit and I did this by getting an increase on my Freedom and getting a separate joint card with my fiancee. I haven’t missed a payment in 4 years and my credit score is over 750. I wouldn’t recommend charging everything if you are a splurger or have a hard time managing your money, but it works for me!

  8. britwash says:

    Big fan of the Target Red Card. I have the debit option. Not only do you save 5% in stores, you also save 5% online, AND get free shipping on everything! For serious Target shoppers like me, I’d highly recommend it!

  9. I would have to agree with all the above too. I don’t have any store cards but I recently acquired an AMEX Blue Preferred Card that gives 6% back on groceries from grocery stores, 3% on gas, and 1% on everything else. Since my girlfriend and I eat in alot and also spend mucho dinero on high quality fresh produce, meat, and fish the $85 annual fee pays for itself in just a couple months. In addition to that card I also use an AMEX Delta Skymiles for all my buisness travel (which is extensive) and a Marriott rewards Visa for business travel. I wouldn’t have acquired these cards without crunching the numbers first, paying close to $300 a year for credit cards is absurd, unless they are paying you back! With reimbursable business expenses ranging from $3,000-$6,000 month not including airline costs, my rewards will handily cover our vacation this year.
    I get a lot of pleasure capitalizing on these offers and not paying a penny in interest. Its like someone said above, if you pay it off monthly it doesn’t matter what the rate is, and even a GOOD rate is still high. Use your circumstances to justify getting a card, but don’t justify getting a card because of potential or perceived benefits.
    Thank you David for the informative site!

  10. The Target card just makes sense.

  11. Quick Question? Is your Google +1 button working right for you? It shows up in a pop up and in a different language when trying to post.

  12. Not really, other than my REI credit card I think the only other company card I have is from Express. Which I never shop at and got when I was 18…oops.

  13. I use my Cabela’s Credit Card for all my everyday spending. It only has a $500 limit, which helps to cap my spending, and I’m able to pay it off in full every 2 weeks when I get paid. This way I avoid the interest, and earn points at a place I frequent quite often :) I still have a couple of other regular credit cards, but I only use those for emergencies, larger purchases, trips, etc, where I would spend over my normal “spending” budget.

  14. I have not heard many of the “talking heads” mention debt is bad. Most of the experts say to “manage” your debt. However, I don’t agree. My wife and I live be old school financial advice: “If you can’t pay cash for it you probably don’t need it.” We have been without a credit card for over 4 years now. We love it! I can’t believe I lived so long with them.
    One of the things I think few people think about with the credit card, is what happens when you are one day late on your payment? My wife and I sent the payment in one day late and were charged the full monthly interest rate on the balance. We paid off the balance every month but since we were late one day, we paid the full amount of interest.
    Eventually the credit cards will get you. This would not happen with a debit card.

    • Just don’t make the payment late and they will never “get you”. The CC companies give you 30 days to pay your statement….

  15. “Bubble bath and wine”… I’ll have to try that next

  16. Vanessa Henderson says:

    never hardly go to Target, no point for me.