How the Target Credit Card Works

The Target credit card, called the RedCard, is a credit card that can be used in Target’s retail stores and on the store’s website. The Target RedCard offers a 5% discount on purchases at Target, no annual fee, and an extra 30 days for returns and exchanges.

However, the Target credit card’s interest rate or annual percentage rate (APR) is over 20%. As a result, if you tend to carry high balances on your credit cards for multiple months, the interest charges could wipe out any savings from the discount.

Though Target offers a 5% savings on purchases, other credit cards offer cash back, which is when the credit card issuer refunds the cardholder a percentage of the amount spent on purchases. Before applying, please use this guide to aid in your research as to whether the Target RedCard is right for you, or whether other cards with their rewards or cash-back features are a better fit for your spending patterns.

How the Target Credit Card Works

The Target RedCard comes in multiple forms including a Target credit card (a store charge card) and a Target Mastercard (a traditional credit card). Target also offers a debit card that automatically draws from your checking account. Each card has similar perks.

Retailers like Target typically partner with a financial institution to offer a branded credit card in which the store and bank share in the interest and fees paid by the customer. Target credit cards are issued by TD Bank USA, N.A.—one of the largest banks in the United States and a subsidiary of The Toronto-Dominion Bank of Toronto, Canada.

The Target RedCard charge card can be used at Target retail locations and for online purchases on Target’s website. The RedCard with the Mastercard logo can be used anywhere. Typically, there are sign-up incentives for those who have been recently approved for a new RedCard.

Rewards and Benefits

The Target RedCard doesn’t offer card rewards, points, or cash back from purchases. Instead, you get a 5% discount every time you use the card at a Target store or their website. Although it may seem like less of an incentive than building up points for a cash value with other cards, the 5% discount allows customers to receive their rewards right away through a discounted price.

Other benefits of the Target RedCard include:

• No annual fee
• Free two-day shipping on many items, although shipping times could be delayed due to ongoing supply chain challenges
• Additional 30 days for returns and exchanges
• Exclusive offers for special items, gifts, and more
• Various sign-up bonuses that vary month by month but generally involve money off a first purchase, or discounts on particular types of goods. The latest offers can be found on the Target website.

You don’t get the discount on prescription drugs, but there’s a separate program through Target’s pharmacy that can help lower the costs of that.

How to Get a Target Credit Card

New applicants can apply for the Target RedCard by completing a credit application. The mail-in application is found on Target’s website, which requires identification and financial information, including your driver’s license number, Social Security number, and annual gross income. You can also apply and submit an online application through Target’s online form.

Required Credit Score

The credit information for how TD Bank approves credit applications is not specifically outlined on Target’s website. Typically, store charge cards are more lenient with credit and income requirements compared to traditional credit cards. However, the credit limit might be lower for a charge card if you have spotty credit because it helps reduce the risk of financial loss to the bank issuing the card.

Although the credit score ranges may not be disclosed, typically, a consumer’s credit history to get approved for a charge card needs to be fair to good. A credit score is a numerical representation of a person’s ability to manage their debts and pay their loan and credit card payments on time. A person’s credit history impacts their credit score, which can include how long their credit accounts have been open, how many times they have made late payments, and the amount of outstanding debt.

A person’s credit score usually determines whether they get approved for a charge card and the interest rate that’s charged on outstanding balances. Although Target doesn’t specifically state what credit score is needed, typically, a person would normally need a credit score above 600 to be approved for a charge card or credit card—although stores have approved cards for consumers with lower scores. If your credit score is below 600, you will likely get charged a higher interest rate and have a lower credit limit if approved.

How to Manage a Target Credit Card

In day-to-day use, a Target RedCard works similarly to the way other credit cards do. If you have the Target Mastercard, you can use it anywhere that Mastercard is accepted. Other types of RedCard only work in Target stores. When you make a purchase, this will appear on your card. You can then make a payment to the card in several ways, including online.

How to Make a Payment on the Target RedCard

There are four ways of making a payment to your Target RedCard:

1. Go to Target.com/RedCard/About, click “Manage My RedCard,” enter your username and password on the Target RedCard login page, and when the Manage My RedCard screen appears, click “Schedule a Payment” under the Payment Information tab on the left side of your screen
2. By phone (800-659-2396)
3. In-store
4. By mail

You can choose whichever method works best for you—there is no charge to pay your balance with any of these methods. Just make sure you meet your payments on time, or the high APR on the RedCard might end up costing you a lot in interest.

Where Can the Target Credit Card Be Used?

The Target RedCard and debit cards are private-label or closed-loop cards, meaning they can only be used at Target stores and online through Target’s website. However, the Target Mastercard can be used at any merchant that accepts Mastercard. If you’re going to use the card at other merchants, please be aware the 5% discount on purchases only applies to purchases at Target and on its website.

Terms and Conditions of the Target RedCard

The Target RedCard offers no low introductory interest rate. The card’s APR of 23.65% is high but standard for most store cards. It will vary based on the prime rate because Target adds a percentage to the prime rate to arrive at the card’s APR.

You have 25 days after your billing cycle ends to pay all charges and avoid interest. The late payment fee is up to $41, depending on your payment history, and will be assessed when any amount due is not paid by the payment due date. In other words, there’s no grace period, but there is no penalty APR and no annual fee. However, a returned payment fee of $30 is charged if you make a payment, such as a written check, and it doesn’t clear the bank.

The card doesn’t offer any balance transfers from other cards. So, if you’re looking for a card that allows you to earn rewards on purchases anywhere, this isn’t the card for you. In fact, there are several excellent cash-back cards currently available that have far more favorable APRs.

When applying for the Target RedCard, you’ll need to provide your financial and personal information including:

• Name and address
• Email address and phone number
• Date of birth
• Social Security number
• Driver’s license or state ID number
• Annual gross income, meaning your income before income taxes are taken out of your pay
• If you apply online through Target’s website, they ask you to create a PIN, which is used to authorize purchases at the store.

When the application is completed and submitted, it is sent to TD Bank USA, N.A., and Target Corporation.

Who Should Consider the Target Credit Card

The Target RedCard can provide a lot of savings with its 5% discount on purchases at Target stores and its website, particularly if you do a lot of your shopping at Target. If you have a family or kids to shop for, the cost of supplies—such as paper towels, cleaning supplies, and groceries—can add up to thousands of dollars per year.

For example, spending $1,000 to $1,500 per month on supplies would add up to $12,000 to $18,000 per year respectively. The 5% discount on all of those purchases would equal $600 to $900 in annual savings (.05 * $12,000 or .05 * $18,000).

Consumers who purchase most of their goods at other stores might be better off with a traditional credit card that offers points and specific discounts that are tailored to the customer’s purchase behavior. Travel cards that partner with airlines and gas rewards are two types of credit cards in which companies partner with banks to offer branded credit cards.

Alternatives to the Target Credit Card

Because Target offers both a store charge card and a traditional Mastercard credit card, you can apply for whichever one suits your needs. Traditional credit cards with the Mastercard logo work anywhere that they’re accepted, which is why they’re called open-loop cards.

Other Types of Reward Cards

If you’re looking for cash back, points, or discounts from purchases at other merchants, it may be more advantageous to get an open-loop card. For example, rewards cards are usually open-loop cards that can be used anywhere versus a store charge card. The rewards can include cash back, airline miles, and hotel rewards. There are also cash-back credit cards in which consumers get a percentage of the amount they spent using the card.

Which card is right for you depends largely on the types of purchases you’ll make and which benefits you’d like to receive from the credit card issuer. For example, there are travel cards that are specifically designed to offer travel points or discounts on airfare and hotels, allowing your purchases to build points over time. If you drive a lot of miles, a card that offers gas points might be best for you because some oil companies and banks offer gas credit cards designed to reduce the cost of fueling up your vehicle.

Credit Cards Offered by Target’s Competitors

Before applying, be sure to shop around and compare the various credit cards offered by stores that compete with Target because you might find a better deal. Target’s competitors include the Sam’s Club Mastercard, Costco Visa, and the Amazon Prime Rewards Visa card. Each of these cards has pros and cons associated with them.

The Bottom Line

The Target RedCard offers consumers the choice of a charge card, for Target purchases only, or a credit card with the Mastercard logo that can be used anywhere Mastercard is accepted. The 5% discount is straightforward and applies to every purchase but only at Target. There are no rewards points to keep track of and if someone purchases a significant amount from Target frequently, the savings can add up over time.

However, the interest rate is high, as is the case for most store-branded cards. Also, please note that if the balance is not paid in full each month, the APR on the Target RedCard and the resulting interest charges could wipe out the savings earned from the discount. However, for those who purchase a lot from Target and are likely to pay off the balances quickly, the Target RedCard could be a good choice with its 5% discount and no annual fee.