The benefits of private label cards
November 19, 2014

For many retailers, the idea of being able to accept credit cards for payment is a bit of an issue, in part due to the upfront costs and largely due to the need to pay interchange fees. There are also other concerns, such as PCI-DSS compliance, especially in the wake of many security breaches by retailers. Now, with the development of several new payments systems, including mobile point of sale, there are a lot of incentives to accept plastic. However, some retailers also need a way to costs down. This is where private-label credit cards come into play.

A store card and more
Private label cards, as defined by CreditCards.com, are essentially credit cards that are branded for a specific store, retailer or other business. Depending on the circumstances, the retailer can issue the cards themselves directly through a card network such as Visa, MasterCard or American Express. It can also work with a third-party issuer like a major bank through a special agreement. The customer would have to undergo a series of terms and conditions to receive the card, most of which are similar to what one receives with a generic credit card. The main difference, along with being branded, is that customers may be offered specific incentives, such as cash back or discounts, with each in-store purchase .

While smaller retailers may be disinterested in the use of private label cards due to having not enough sales volume to effectively use them, midsized merchants have a much greater incentive to issue them. A general rule of thumb, as noted by Retail Solutions Online, is for stores to be generating at least $1,000,000 in revenue annually to use such an approach. More importantly, it should be applied at a store that has a lot of goods that are preferably paid through credit cards, usually high-dollar purchases. The store should also have a customer base that wants to pay with credit cards and is creditworthy.

There are a lot of benefits associated with using private label cards. The primary one is increasing customer loyalty. By having a card that is branded by a store that they like, consumers will be more incentivized to revisit the store for various reasons. It also increases brand awareness by showing that customers use the card to take advantage of what a specific retailer has to offer. Most importantly, by working directly with an issuer, a retailer may be able to avoid some of the transaction fees associated with accepting credit card payments.

Nexus: G-WEBCD2