4 Big Mistakes I Made With My Target Card and What I Learned

The Target REDcard™ Credit Card doesn’t aim for flash.

It doesn’t offer traditional rewards, and the razzle-dazzle it does provide — a 5% discount — is limited to eligible purchases at Target. But if you already do most of your household spending there (entirely possible at a retailer of Target’s size), that’s a lot of potential savings, which is why it’s among NerdWallet’s best store credit cards.

Still, as with any card, you should use a Target card smartly and responsibly.

I didn’t. Don’t be like me.

» MORE: Full review of the Target REDcard™ Credit Card

Mistake No. 1: I used it outside Target — frequently

Target’s REDcard products include a debit card and two credit cards, all of which have an annual fee of $0 and offer the same 5% discount. But there’s a key difference in where you can use these cards:

• The Target REDcard Debit Card and the Target REDcard™ Credit Card are “closed-loop” cards, meaning you can use them only at Target or Target.com.
• The Target REDcard Mastercard is an open-loop credit card, meaning you can use it anywhere that takes Mastercard. You can’t apply for this card directly. Once you have the Target REDcard™ Credit Card, it might be offered to you as an upgrade.

I got into trouble with the second one.

I opened the Target REDcard™ Credit Card in the mid-aughts, after some salesmanship from the checkout clerk who promised me I could save money immediately on that day’s purchase by filling out an application.

The clerk may have mentioned the ongoing 5% discount, but it didn’t even register for me at the time. All I heard was “upfront savings today!” — and all I knew was that I now had another way to pay for things at Target.

I was approved and got that one-time upfront discount, and all went well at first. I didn’t shop at Target much, so the risk of overextending myself was low. But after some time as a Target REDcard™ Credit Card cardholder, I got upgraded to the open-loop Mastercard.

I used my card almost anywhere BUT Target — and had nothing to show for it except a high ongoing interest rate.

Again, the notice in the mail may have reemphasized the 5% discount at Target, but all I took away from it was that I now had another way to pay for things anywhere!

And that I did, using the card almost anywhere but Target, which defeated its purpose and left me nothing to show for it except a high ongoing interest rate. The ongoing APR is 25.15% Variable.

» MORE: Before you get a retail credit card, consider your options

Mistake No. 2: I maxed it out

As you might imagine from such reckless shopping abandon, I bumped up against the card’s credit limit — often. I treated my Target card as if it were money I actually had in my own bank, and I carried large balances from month to month.

So not only was I not getting the 5% discount on my purchases that is the single selling point of the card, and not only was I incurring massive interest charges, but I was also running up my credit utilization.

I was well above the 30% credit utilization threshold on my Target card for years, and my credit scores suffered as a result.

Credit utilization is the amount of debt you owe as a percentage of your available credit, and it’s one of the largest factors in your credit scores. Typically, you want to aim for 30% or below.

I was well above that threshold on my Target card for years, and my scores suffered as a result.

» MORE: 30% credit utilization rule: The lower the better

Mistake No. 3: I used retirement money to pay it off

Any financial advisor will tell you that this is a big no-no. Even if you’re deeply in debt thanks to sky-high credit card APRs, it’s almost never a good idea to withdraw retirement funds early, thanks to taxes and withdrawal penalties. Plus, you’ll sacrifice future gains from that money, and future gains are the entire point of such funds.

At the time, in 2012, I had more than $10,000 of debt on my Target card alone. I’d just moved from South Carolina (low cost of living) to Los Angeles (extremely high cost of living), and bills were piling up like cars on the 405. I felt quite frankly like I was drowning.

It was certainly not the smartest money decision I’ve ever made, and I paid for it dearly at tax time the next year.

To my younger and less financially educated self, the ability to pay off a large and extremely high-interest debt in one fell swoop felt worth it, especially since it didn’t completely drain my IRA. The truth is, I was so happy to be rid of that debt that I didn’t care about the consequences.

It was certainly not the smartest money decision I’ve ever made, and I paid for it dearly at tax time the next year. A much wiser move would have been to open up a balance transfer credit card with a lengthy 0% intro APR offer and move the Target debt there. But — and this probably isn’t stressed enough in these cases — for someone with little knowledge of or experience with credit cards, opening yet another card when you’re already struggling so mightily can seem daunting and counterintuitive.

» MORE: How to choose a balance transfer credit card

Mistake No. 4: I cut up the card

It didn’t register as a “mistake” to me at the time — quite the contrary. I was so proud of destroying the card that I joked about it on Facebook:

I wince every time I see that post pop up in my “Memories,” because closing an existing credit account — or allowing it to be closed for lack of use — may not be the best move. By 2012, my Target card had been open for a healthy amount of time. Losing it reduced the average age of my active accounts, which is another factor in credit scores.

I should have kept the account open, although at least now I recognize it as a teachable moment:

» MORE: More store credit cards are competing to be your everyday card

What I wish I’d done differently

I’m in a much better place these days with my credit and my scores, but I still think about these mistakes and what I would have done differently.

For starters, applying for a store card didn’t make a lot of sense for me. I wasn’t a frequent Target shopper then, and I’m still not today. I would have been much better off applying for a general rewards credit card, which might have offered me a sign-up bonus to defray my Target purchase that day and would have rewarded me for the spending I was doing elsewhere. Plus, the interest rate on a general rewards card would probably have been lower.

Of course, I wasn’t paying off my balance each month anyway, so interest would have still destroyed any rewards-earning potential. I should have paid off purchases immediately after making them, but I barely grasped what an APR in the high 20s even meant.

I should have paid off purchases immediately after making them, but I barely grasped what an APR in the high 20s even meant.

Would I have advised a younger me to dip into retirement funds to pay off this debt? Probably not. And yet, it’s still hard for me to say I regret doing it. I was barely treading water back then, struggling to pay monthly bills, and wiping out $10,000 in high-interest debt came as a big relief. I can’t say I knew enough about any other options, and I certainly can’t say I was sorry to see that debt go away. Seventy-year-old me? He may beg to differ.

And while I don’t really miss the Target credit card itself, I do kick myself for cutting it up and never looking back. As a father of two young children, I’m much more likely to walk into a Target now than I was in 2005. And a 5% discount on diapers, clothes, toys and snacks? That sure would come in handy right about now.

» MORE: Read some other #CreditCardFails from our experts