My favorite new rewards card isn’t even a credit card — it’s a debit card. Target’s RedCard seems like an attempt by the department store to take the fight to Amazon, and in my opinion they’ve laid out a pretty sweet deal which is superior to Prime.
I canceled my Amazon Prime membership shortly after starting this blog in July of 2019 upon reviewing my budget for the first time in several years and noting how much money I was spending at Amazon. Most of that spending was frivolous and probably in a way subconsciously justified by me having the Prime membership. Since then we’ve shifted purchasing most of of our household supplies to Target (at the physical store), finding that their prices were less volatile than Amazon. Extra discounts off these products was a great reason for me to get the RedCard.
Free $40 bonus coupon for opening a RedCard
A promo that they’re running right now will send you a coupon for $40 off your next purchase of $40 or more, as long as you sign up for the RedCard before August 27th, 2022. The coupon will be valid until September 17th, 2022. Note that if you miss this specific promotion, just make a calendar reminder to check Target’s website again in a few weeks; chances are the welcome bonus offer will be back. Both myself and a friend missed the offer window at separate times this year as life got away from us, then checked back a few weeks later and were able to snag it.
As far as credit card bonuses go, $40 isn’t anything worth bragging about or opening a new credit card for. However it’s interesting that RedCard has a debit card variant which comes with all the perks of their credit card, except it can only be used at Target. So no credit report inquiry, new account, or credit score hit to deal with, and you get all the same great perks at Target which is the entire point of the card.
Features and benefits of RedCard
Here’s the main features of the RedCard debit card:
- 5% off at Target and Target.com (note that this is an immediate 5% discount, not cash back)
- No annual fee
- Free two-day shipping on “hundreds of thousands of items”
- An additional 30 days for returns and exchanges
The credit card version additionally offers 2% cash back on dining and gas purchases, and 1% everywhere else. These features aren’t great compared to other credit cards, so again I don’t particularly feel the card is worth using outside of Target in which case one might as well go with the debit version.
A better deal than Amazon Prime?
In my opinion, the Target RedCard is better than Prime because it offers the same benefits for shoppers that Amazon Prime members pay a $139 yearly membership fee for. Everyone knows Prime offers two-day shipping, and Prime members with the Amazon Rewards Visa Signature Card get 5% cash back on every Amazon purchase (non-Prime shoppers get 3% cash back). So it’s quite the clever play for Target to match the 5% back and free two-day shipping all with no fee, which could incentivize some Prime subscribers to switch their loyalty to save on the annual membership fee.
Of course, if you use some of the other benefits offered by Prime such as the video streaming and not just the shopping benefits that may shift this equation. However, the RedCard’s existence should cause Amazon fans to take a good look at whether they’re truly getting their money’s worth for the Prime membership fee. A recurring $139 per year (which will probably continue to increase in the future) for Amazon Prime isn’t chump change.
No need to carry yet another physical card
Usually I detest how every store and brand wants you to download their own app onto your phone. However, the Target app for iOS and Android actually offers one interesting benefit. The app has a feature called Wallet, where users can add their RedCard to the Target app and generate a barcode to scan at checkout to transmit their payment details. Ergo, no need to carry your physical RedCard on you when shopping in store.
This feature is fairly redundant with digital wallets using NFC such as Apple Pay, Google Pay, and Samsung Pay, however the RedCard specifically cannot be added to these digital wallets, and perhaps this feature was restricted to encourage more people to download their app. I will give them a pass since users can also add coupons from Target Circle to the barcode, transmitting all of their discounts and payment information in one scan when shopping in store.
Obviously, not much difference here for solely online shoppers. But with these niche rewards cards, it’s always nice not to have to carry the card on you “just in case” you end up in a situation to use it.
Debit downsides?
One of the main areas where debit cards differ from credit cards is in the handling of fraud. Since debit cards withdraw money from your checking account immediately, in the US they are governed by the Electronic Funds Transfer Act (EFTA). For credit cards, the Fair Credit Billing Act (FCBA) applies.
For credit cards, your maximum liability for fraud under the FCBA is $50 if you report the transaction within 60 days of receiving a bill, and zero if you report the card lost or stolen before any transactions occur. Many credit card companies offer zero liability in the absence of personal negligence, waiving the $50 maximum liability.
Since the rules for debit cards are set by the EFTA, the minimum required fraud protection is a bit different. If you report it lost or stolen before any fraudulent transactions, your liability is zero. You can be liable for up to $50 if you report it within 2 days after fraudulent transactions occur, and up to $500 if you report it within 59 days. After 60 days, there is no financial protection against fraud.
However, the above is for physical cards. If your card is not physically lost or stolen, you have up to 60 days to report transactions with zero liability. So if your card number was skimmed or hacked from a database and used in an online transaction (where no PIN is required) you would not be liable for transactions made as long as you noticed within 60 days.
Thankfully Target has gone far above and beyond the minimum required fraud protection for debit cards under the EFTA. The RedCard debit card agreement reads “You will not be held responsible for unauthorized use of your Card, Card number, or PIN if you have exercised reasonable care in safeguarding your Card, Card number, and PIN from loss or theft.”
Generally, the best way to financially protect yourself when using a debit card is to never put your physical card in a situation where it could be lost or stolen. Leave it at home (ideally in a safe) and only use digital payment methods. This strategy will always effectively make the debit card fraud protections offered under EFTA as strong as those given to credit cards under FCBA — zero liability for any fraud you notice within 60 days.
Final thoughts
I’m enjoying RedCard as a way to save a little more money on household supplies that we need to purchase anyway. We canceled our Prime membership three years ago and haven’t missed it — in fact my spending on consumer goods is down over 50% since that point.
Unfortunately most of us have few to no options for shopping local when it comes to household supplies like toilet paper, cleaning products, and trash bags, so some sort of large retailer usually must be relied on for these types of purchases. I don’t hold any illusions about Target being more ethical than Amazon as a company.
With 5% back and no membership fee though, Target is challenging Amazon and in my opinion has created a superior financial incentive for consumers with RedCard, as Prime members need to sign up for the Amazon Rewards Visa Signature Card and pay $139 yearly to get 5% cash back. At this point, I would wager that most Prime members aren’t getting their money’s worth out of the membership fee and are simply coasting along in that ecosystem out of habit. Consumers looking to save some money need to be flexible with their shopping habits, and membership fees can counteract this by instead getting shoppers to think in terms of sunk costs.
If you’re interested in getting a Target RedCard, you can head to their site here to apply. There’s no extra code or anything to enter to get the $40 bonus coupon, as long as you sign up before August 27th you’ll receive that in the mail. RedCard doesn’t have a referral program; I’m recommending this card simply because I think it’s worth checking out to save some money on retail shopping.
Funny, I’ve been saying this for a couple years too. We also gave up our prime some years ago and buy a lot fewer things now. And I like that target means we can return things in person easily. Also I find some staples like eggs and milk are priced really well at target compared to nearby grocery stores.
Great tip on the groceries! 5% back is more than most rewards credit cards offer at grocery stores. I’ve noticed Target’s dry goods/packaged foods are competitively priced with grocery stores. You definitely can’t do a week’s worth of shopping there but if you’re already at the store for other things it’s worth checking out if you can supplement your pantry and save some money.