A private label credit card is a store-branded credit card that is intended to be used at a specific store. It is a type of revolving credit plan that is managed by a bank or commercial finance company for either retail or wholesale manufacturers, such as department and speciality stores. Private label credit cards do not carry a credit card logo such as Visa or Mastercard and are generally not used with other merchants. These cards are described in further detail below…
Why do companies issue their Private Label Credit Cards?
Companies issue their own credit cards for several reasons. One is that it increases the volume of sales by providing customers with an alternative way of shopping with them. More importantly, private label cards are the least expensive form of payment that can be accepted by retail companies. This is because tasks that would otherwise be repetitive are automated.
How do Private Label Credit Cards earn customer loyalty?
Private credit cards have been observed to have a deep and lasting effect on customer loyalty. The presence of a card containing the logo of a prominent company in the wallet of a customer has an emotional impact and creates a kind of bond, as it were, with that company, precisely because of the exclusivity of such cards. The private label credit program allows retailers to offer more lenient as well as extended terms to customers than they could otherwise. Many stores offer private label credit cards to their customers to encourage them to spend more by offering the convenience of a credit card along with deferred payment. In addition to that, when a customer makes a purchase with a private label credit card, they will usually earn loyalty rewards, such as a discount on a future purchase. Thus, in this way, a private label credit card encourages repeat business and customer loyalty. These cards can also make shopping more convenient for customers through features such as returns without receipts.
Breaking down a Private Label Credit Card
Private label credit card programs partner with a third party financial institution to manage the card program for business. These third-party partners perform several functions. These include the issuance of cards, funding of credit, and the collection of payments from customers. The financial institution and the retailer jointly establish the criteria for credit. The financial institution is then responsible for the underwriting and card issuance process.
Private label credit cards are similar to other credit cards in a few aspects. They charge interest if you carry a balance, charge a fee if your payment is late and have a grace period if you do not carry a balance and paid your previous credit card bill in full and on time. They are also similar to other credit cards when it comes to payment processors. While private label credit cards do not carry a payment processor’s logo, they are still backed by a payment processor such as Visa. The payment processor makes it easy for stores to offer private label credit cards by offering cards that work with the store’s existing terminals and point-of-sale equipment.
How does the process work?
Larger companies tend to issue and manage credit cards entirely on their own, while smaller ones, as mentioned in the introduction, are more likely to sign an agreement with a bank, which sets up a line of credit with the client and determines the credit requirements for card applicants.
How to use Private Label Credit Cards for your benefit?
Keep the following points in mind when you use a private label credit card to reap its benefits:
Before applying for a private label credit card, understand what it means.
Some private label credit cards give qualifying shoppers the option to finance purchases or offer special perks and benefits for being a loyal customer. The credit card can only be used at a particular brand’s retail stores.
Private label credit cards can help build a stronger credit profile.
It is important to use private label credit cards responsibly. On-time payments are crucial to keeping your account in good standing. Banks that service credit card programs, like Comenity Bank, report to the credit bureaus. This means if consumers keep their credit card account in good standing, they can use private label credit cards to help bolster their credit score.
Find out if the retailer offers special financing.
For qualifying cardmembers, special financing may be available. Make sure to read the credit card agreement for more details and to learn more about the terms and interest rates.
Take advantage of brand benefits.
Private label credit cards offer brand-specific rewards over general-purpose cards. Regular shoppers can earn exclusive rewards and special offers, which can lead to significant opportunities for savings.