What is a 'Private Label Credit Card'

A private label credit card is a store-branded credit card that can only be used at that store. A private-label credit card is a type of revolving credit plan managed by a bank or commercial finance company for either retail or wholesale manufacturers, such as department and specialty stores. Private label credit cards do not carry a credit card logo such as Visa or Mastercard and cannot be used with other merchants.

The private label credit program allows retailers to offer more lenient and 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 and deferred payment. In addition, 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. In this way, a private label credit card can encourage repeat business and customer loyalty. Private label cards can also make shopping more convenient for customers through features such as receiptless returns.

BREAKING DOWN 'Private Label Credit Card'

If a third party, such as a bank, manages a private-label credit program for a retailer or manufacturer, it will perform several functions. These include the issuance of cards, funding of credit and the collection of payments from customers. The criteria for credit are jointly established by the service provider and the retailer.

Private label credit cards are similar to other credit cards in that they charge interest if you carry a balance, charge a fee if your payment is late and have a grace period if you don’t carry a balance. They are also similar to other credit cards in that 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.

Target is one of many retailers that offers a private label credit card as of 2014. Called the RedCard, it gives consumers 5% off all purchases at the point of sale, free shipping on all online purchases and an extra 30 days on top of the usual 90-day return window to get a refund for unwanted purchases. Similarly, Nordstrom offers a private label credit card that gives customers $20 off a $100 purchase on the day they apply plus points on each purchase that can be redeemed for future discounts. Target and Nordstrom also each offer Visa cards that offer store-specific benefits and can be used anywhere Visa is accepted.

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