Target REDcard Review

Pros and Cons of the Target REDcard

Target store
••• Justin Sullivan / Getty Images

Anyone who's shopped at Target has no doubt been offered the Target REDcard, Target's credit card that lets you save on each purchase. If you're a Target shopper, and you're thinking about getting the Target REDcard, here's what you need to know.

Perks and Benefits of the Target REDcard

You get a 5 percent discount on purchases at Target and whenever you use your Target REDcard for purchases—that means every day, 365 days a year. This isn't a rewards program where you accumulate a certain amount of cash back to use for future purchases. The discount is automatic—you don't have to sign up, enroll, or make a redemption to get the benefit.

The Target REDcard even beats most other store credit cards, which only offer a discount on purchases you make the first day you open your account. Instead, the Target REDcard gives you a discount starting the day you open the account—and lasts forever. There is also no annual fee ​on the Target REDcard. That means you can enjoy discounts on all your purchases at no cost—as long as you pay your balance in full each month.

The math is pretty simple. If you're a regular Target shopper, you'll save $5 for every $100 you spend at any Target. However, it's worth noting that not all your Target purchases will qualify for the discount. Exemptions include such things as target's optical eye exam, gift cards, gift wrapping, previous purchases, certain restaurant merchants in Target stores, such as D’Amico & Sons Italian Kitchen and Pret A Manger, and wireless protection program purchases—as well as deposits required by mobile carriers.

Other Perks

If you're a coffee-lover, you get 5 percent off your purchase when you use your Target REDcard at any in-store Starbucks location. Additionally, you get free two-day shipping ​on purchases when you use your Target REDcard as long as you choose standard shipping. Although, you'll have to pay for upgraded shipping methods, such as overnight delivery.

Target REDcard Pricing

While you won't pay an annual fee on the Target REDcard, there are penalty fees based on how you use your card. There's a late fee of up to $38 when you're late on your monthly minimum credit card payment and a $27 returned payment fee if your bank returns your credit card payment. Purchases are charged at 23.40 percent APR, which is considered very high for the industry.

What to Watch Out For With the Target REDcard

As with all credit cards, especially rewards credit cards, you should pay your balance in full each month to avoid finance charges and to get the full benefit of your 5 percent discount. If you get complacent and miss payments, your 5 percent saving will evaporate quickly.

Also, if you're a big Target shopper, having a credit card at your disposal in your favorite store might tempt you to overspend. Therefore, watch your spending the same way you would if you were using your checking account—or, better yet, cash. After all, you have to be able to afford to pay your balance in full each month or the steep interest rate will wipe you out.

Also, pay attention to your credit utilization. Store credit cards often come with a low credit limit and are easy to max out. Keep your credit card balance below 30 percent of the credit limit, especially around your account statement closing date, so your credit score isn't impacted by a high balance.