If you‘re a frequent Home Depot shopper or a professional contractor, you‘ve likely considered applying for a Home Depot credit card to take advantage of special financing offers and exclusive perks. But before you fill out that application, it‘s important to understand exactly where and how you can use a Home Depot credit card.
As a consumer finance expert who has studied the retail industry for over a decade, I‘ll share my insights on Home Depot‘s credit card acceptance policies. We‘ll cover the different types of Home Depot credit cards, where they can and cannot be used, and some strategic considerations for savvy shoppers.
Home Depot‘s Dominance in Home Improvement Retail
To understand the appeal and limitations of Home Depot credit cards, it‘s helpful to look at Home Depot‘s competitive positioning in the home improvement retail market. With over 2,300 warehouse-style stores across North America and $151 billion in revenue in fiscal year 2021, Home Depot is the undisputed market leader.[^1] For context, that‘s more than the GDP of Ukraine.[^2]
Roughly 45% of Home Depot‘s sales come from professional contractors and builders, who rely on the retailer for a wide assortment of building materials and fast job-site delivery.[^3] Pros are a key target market for Home Depot‘s credit offerings. By providing favorable financing terms, Home Depot aims to deepen loyalty and wallet share among these high-spending customers.
Types of Home Depot Credit Cards
Home Depot currently offers three different credit cards through a partnership with Citibank:
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The Home Depot Consumer Credit Card: Geared toward DIY shoppers, this card offers 6 months deferred interest financing on purchases of $299 or more. It can only be used at Home Depot.
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The Home Depot Commercial Revolving Charge Card: Designed for contractors and business owners, this card offers 60 day payment terms and itemized statements for easy expense tracking. It can only be used at Home Depot.
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The Home Depot Commercial Account Card: A more robust financing solution for larger pro customers, this card offers 60 day payment terms, itemized statements, and fuel discounts of up to 10% at select gas stations. However, it still can only be used for Home Depot purchases.
All three of these credit cards are considered "private label" or "closed-loop" cards. That means they can only be used for purchases at Home Depot stores and online at homedepot.com. They aren‘t affiliated with a major payment network like Visa or Mastercard, so you can‘t use them anywhere else.
This is a notable difference from many other retail credit programs. About 3 in 4 retailers offer co-branded credit cards in partnership with Mastercard or Visa in addition to closed-loop store cards.[^4] For example, Lowe‘s offers a closed-loop store card for Lowe‘s purchases only as well as a co-branded card that can be used anywhere Visa is accepted. Home Depot has chosen to stick with store-only cards.
Where You Can‘t Use a Home Depot Credit Card
It‘s just as important to know where Home Depot credit cards are not accepted. Here are the key restrictions to be aware of:
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Other home improvement stores: You cannot use a Home Depot credit card at competitors like Lowe‘s, Menards, or Ace Hardware, even if they sell identical products.
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Other retailers in general: Home Depot credit cards cannot be used at grocery stores, gas stations, restaurants, or any other merchant that isn‘t Home Depot. Don‘t expect to earn rewards on everyday spending.
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Home Depot stores in Mexico: If you‘re shopping at one of Home Depot‘s 126 locations in Mexico, you‘ll need to use a different payment method. Home Depot credit cards issued in the US cannot be used internationally.
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For Home Depot gift cards: Home Depot partners with a third-party company called CashStar to manage its gift card program. CashStar does not accept Home Depot credit cards as payment, so you‘ll need to use a regular bank card to purchase gift cards.
It‘s clear that Home Depot credit cards are designed for customers who are loyal to the Home Depot brand and don‘t mind concentrating their home improvement spending with a single retailer. If you prefer to shop around and compare prices, a general cash back or rewards credit card would offer much more flexibility.
Home Depot‘s Credit Card Profitability
Why would Home Depot limit its credit offerings to closed-loop cards only? In short, because they‘re highly profitable and drive customer loyalty.
In fiscal 2021, Home Depot recorded $10.5 billion in sales on its private label credit cards, a 10.6% increase over 2020.[^1] Perhaps more notably, the company‘s credit card portfolio generated $2.1 billion in profit before taxes, for a profit margin of over 20%.[^1] Most of this profit comes from interest charges and fees paid by cardholders.
Retail credit cards tend to charge significantly higher interest rates than general purpose cards from major banks. A 2022 survey by CreditCards.com found that the average APR on retail cards was 26.72%, compared to 22.66% for general credit cards.[^5] While Home Depot doesn‘t disclose the specific terms of its cards, it‘s likely they fall at the higher end of the range.
By offering special financing promotions and exclusive perks, retailers like Home Depot are betting that cardholders will spend more and carry balances from month to month, generating interest income. And for the most part, this strategy has paid off. Home Depot‘s credit card penetration and balances have steadily increased over the past decade.[^1]
The Rise of Financing for Home Improvement Projects
Another reason Home Depot has doubled down on its credit offerings is the growing consumer demand for financing options, especially for larger home improvement projects. A 2022 study by Houzz found that 59% of homeowners used a credit card or loan to pay for their most recent renovation project, up from 55% in 2021.[^6]
As housing prices have skyrocketed and homeowners are staying put longer, there‘s a growing focus on upgrades and remodels. Roughly 1 in 4 homeowners are planning improvements of $10,000 or more in the coming year.[^6] For many, that means seeking out payment plans to spread out the expense over time.
Home Depot‘s deferred interest promotions are designed to appeal to customers planning larger purchases. By offering 6 or even 12 months of no interest on purchases above a certain amount, Home Depot aims to incentivize bigger ticket sales. Of course, customers need to be diligent about paying off the balance in full before the promotion ends, or else they‘ll be hit with retroactive interest charges.
The Threat of Buy Now, Pay Later
While retail credit cards have historically dominated the financing market for big-ticket purchases, a new challenger has emerged in recent years: buy now, pay later (BNPL) loans. Popularized by fintechs like Affirm, Afterpay, and Klarna, BNPL allows customers to split purchases into installments, often with no interest or fees.
BNPL has exploded in popularity, with more than 20% of younger consumers using it for home improvement purchases.[^7] The application process is quick and easy, and approvals are more lenient than for traditional credit cards. For retailers, BNPL increases average order values and reduces cart abandonment.
Several of Home Depot‘s competitors, including Lowe‘s and Walmart, have recently introduced BNPL options for online purchases through partnerships with Affirm. As of this writing, Home Depot has yet to embrace BNPL, instead promoting its private label credit cards as the go-to financing solution. But as BNPL continues to gain mainstream adoption, Home Depot may need to evolve its credit strategy to keep up with customer expectations.
Weighing Your Home Improvement Financing Options
So what‘s the best way to pay for your next trip to Home Depot? It depends on your specific needs and shopping habits. Here are a few scenarios where a Home Depot credit card could make sense:
- You‘re a professional contractor who buys materials from Home Depot every week
- You‘re planning a big-ticket appliance purchase or remodel and want to take advantage of deferred interest financing
- You‘re not interested in earning rewards and prefer the simplicity of a single-store card
On the flip side, here are some reasons you might prefer a general rewards credit card or BNPL loan instead:
- You like to shop around and compare prices at multiple home improvement stores
- You want to earn cash back, points, or miles on your home improvement spending
- You don‘t spend enough at Home Depot to justify a dedicated store card
- You‘re wary of deferred interest financing and prefer a more predictable payment plan
Ultimately, the right financing strategy will depend on your budget, spending patterns, and how much you value flexibility versus rewards. But by understanding the ins and outs of Home Depot‘s credit card program, you can make an informed decision that aligns with your home improvement goals.
Key Takeaways
- Home Depot is the largest home improvement retailer in the US, with over $150 billion in annual sales
- Home Depot offers three private label credit cards through Citi: a consumer card, a commercial revolving card, and a commercial account card
- Home Depot credit cards can only be used for purchases at Home Depot stores and online at homedepot.com; they cannot be used at other retailers or for gift card purchases
- Private label retail cards are highly profitable for retailers due to high interest rates and fees; Home Depot generated over $2 billion in credit profit in 2021
- Financing is becoming increasingly popular for big-ticket home improvement projects, with 59% of consumers using credit for their most recent renovation
- Buy now, pay later loans are emerging as a challenger to traditional retail credit cards by offering flexible payment plans with less stringent underwriting
- Savvy shoppers should weigh the pros and cons of store cards, co-branded cards, and BNPL financing to find the best fit for their needs
[^2]: World Bank national accounts data
[^3]: Home Depot Investor Presentation, August 2022
[^4]: The Nilson Report issue 1227
[^5]: CreditCards.com 2022 retail store card survey
[^6]: 2022 Houzz & Home Study
[^7]: 2022 Buy Now, Pay Later Home & Building Survey
