Private-label Credit Cards 101
Private-label credit cards are an increasingly popular payment option among both retailers and shoppers. Instead of relying only on traditional credit cards, these brand-specific alternatives make it possible to boost brand awareness, nurture customer loyalty, increase revenue, and decrease cost —all at the same time.
Learn more about this alternative payment option and its perks for brands and consumers.
What is a Private-label Credit Card?
Private-label credit cards are similar to general-purpose credit cards, with one important distinction: they are used at a specific store or brand. The brand partners with a bank to process the transactions, making it easier for customers to pay for items or services at that retailer. Usually, these store-brand credit cards cannot be used anywhere except at the store that issued the card.
The Difference Between Private-label and Other Credit Cards
There are three main types of credit cards: private-label, general and co-branded cards.
Private-label credit cards are those issued by a certain retailer that can only be used at that retailer. They are also referred to as “closed-loop” cards. There are several benefits to the retailer or brand of offering private label credit cards and therefore often offer the “richest” customer perks.
Co-branded credit cards are created through a partnership between a bank and a specific brand. These credit cards can be used anywhere credit cards are accepted and typically offer consumer perks tied to the issuing brand. Airlines, for example, often offer co-branded credit cards to allow consumers to accrue miles and other travel-related perks.
General-purpose credit cards are the most common type of credit card. These cards are issued directly from a bank or financial institution. They can be used to make purchases at any retailer that accepts credit cards within your processing network, like Visa or Mastercard.
What are the Benefits of a Private-Label Credit Card?
Private-label credit cards have many advantages for both the issuing retailer and the consumer.
Benefits For Consumers
Private-label credit cards often offer increased incentives and perks for the consumer to reward them for their loyalty. Many cards offer bonuses or loyalty points to encourage customer retention.
Some cards also give customers more lenient terms, like extended return windows or early access to sales, making it a smart choice for those who are loyal to certain retailers. Private-label credit cards are often easier to qualify for as well, making them a good option for those looking to build or improve their credit.
Benefits For Retailers
Because of the additional credit line and exclusive perks available through private-label credit cards, consumers spend more money with the retailers that offer them. They can also help to increase brand recognition and spread more awareness in the marketplace. Additionally, because these cards are “closed-loop” and don’t ride the traditional network rails (e.g. Visa, Mastercard), the offering retailer saves dramatically on payment processing fees. It is often these savings that allow the retailers to fund their customer loyalty programs.
How to Apply for a Private-label Credit Card
Typically, consumers apply for a private credit card label in person at the issuing store or via the company’s website. There are often increased benefits at the time of application, such as a higher discount or one-time credit, that make the card an appealing option for customers. To apply, consumers often have to provide personal information including their state-issued identification, social security number, and total annual income.
Once a customer has applied and is approved, they can easily set up their card as they would most other general-purpose credit cards via an online account. Their account is also where they’ll make payments, view statements and keep track of spending activity.
Private-label credit cards are an ideal option for customers who are loyal to a particular brand. By allowing them to accrue points or perks, the retailer not only increases customer retention but also helps boost sales—that way, it’s a win-win option for customers and retailers alike.
Platforms like Tandym make it simple for merchants across industries to create private-label credit cards. Learn more about getting started and request a demo!
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