How the Gap Credit Card Works: Benefits & Rewards (GPS)

Clothing chain and perennial mall staple the Gap, Inc. (NYSE: GPS) launched its retail credit card in 2007. The card offers numerous perks and rewards for frequent customers, but there are some downsides and caveats of which potential users should be aware.

The Gap's credit card, called GapCard, comes in different versions. The most basic option is a store-only card that can be used at Gap stores as well as Banana Republic, Athleta, Old Navy and Intermix. It can also be used for online purchases.

Consumers can also apply for a Visa-affiliated Gap card. This card can be used anywhere Visa is accepted and accrues bonus points for the Gap rewards program, albeit at a slower rate than at Gap family stores. Visa cardholders can get cash advances for a 4% fee or a minimum charge of $10, whichever is greatest. Loyal customers who meet certain criteria qualify for an upgrade to a silver card, which comes with or without the Visa logo.

New cardholders receive a 15% signup bonus on the first purchase of Gap merchandise. Purchases made at the Gap family of stores accrue points at a rate of five points per dollar spent. Visa-enabled cards used for purchases at non-Gap stores receive one point per dollar spent. These points can be redeemed for $5 rewards per 500 points which effectively gives all Gap store transactions made with the card a 5% discount.

Cardholders also receive a number of perks and offers to participate in special events. These include special offers to earn extra rewards points on Tuesdays with an additional 10% discount on all merchandise, birthday bonus offers and a waiver on the company's return receipt policy.

Those who earn more than 5,000 points in a year are awarded an upgrade to silver status. These cardholders receive 20% extra quarterly bonus points, free online shipping, the option to choose their preferred sale dates and free basic alterations at the Banana Republic stores.

People who shop at the Gap family of stores frequently benefit the most from this card, especially those who qualify for the silver upgrade. The 20% quarterly bonus point boost makes a difference for those who primarily rely on Gap stores for their clothing needs.

Nordstrom and American Eagle Outfitters are main competitors that offer retail reward credit cards.

Like Gap, Nordstrom, Inc. (NYSE: JWN) offers cards with and without Visa affiliation. Cardholders accrue two points per dollar spent at Nordstrom, Nordstrom Rack and HauteLook in stores and online. Visa cardholders earn one point per dollar spent elsewhere and get $20 vouchers per 2,000 points. Cardholders also get early access to sales events, reimbursement by voucher for in-store alterations and special triple-points days. New cardholders get a $20 voucher if they spend at least $100 on their first purchase.

The American Eagle Outfitters (NYSE: AEO) credit card also comes with and without Visa affiliation. AEO offers 15% off the first purchase, with some restrictions, and gives one point per $25 spent at AEO or AEO-affiliate Aerie. Visa cardholders also get one point per $100 spent elsewhere. For every 10 points, the cardholder receives a $10 discount. Cardholders also get a 20% extra birthday discount and access to four exclusive sales events per year.

The 15% initial discount only applies to Gap brand merchandise. No third-party products are eligible. Discount Tuesdays do not apply at all Gap family stores. Old Navy, Banana Republic, Athleta and Banana Republic Factory Stores are all excluded. The annual percentage rate (APR) is 24.99%, which is almost 10% higher than the average credit card issued by banks.