U.S. Retail: Private Label Credit Card vs. Co-branded Network Credit Card

Author: Brian Weakliam, Founder & CEO

Private Label Credit Card

A private-label credit card is a store-branded credit card for a specific retailer. It is a form of revolving credit plan managed by a bank or finance company for either retail departments or specialty stores. Private label credit cards do not carry a credit card network logo, such as Visa or Mastercard, and are usually not accepted by other merchants.

Rebounding from declining transaction volumes during the Covid period, the private label credit card market will continue through 2025 with nominal purchase volume growing a total of 9.8% through 2025 and card outstandings growing a total of 9.7% during the period, according to a recent report 'Private Label Credit Cards in the US, 13th Edition.

Six major private label credit card issuers, Synchrony Financial, Citibank's Citi Retail Services, Capital One, TD Bank, Bread Financial, and Wells Fargo, dominate the market.

Whereas Buy-Now, Pay-Later (BNPL) has impacted credit card purchase volumes, the private label card industry is thriving due to customer loyalty and additional revenue associated with store credit cards.

Private-label credit cards face challenges, including higher debt write-downs and delinquency rates, rising interest rates, and potential caps on late fees. Increased regulation of late fees by the Consumer Financial Protection Bureau (CFPB) threatens the income model, and credit card issuers are challenging the proposed caps on late fees.

Co-branded Network Credit Card

This type of Private Label Credit Card is offered by retailers such as Target, Costco, and Nordstrum; it gives customers specific benefits for purchases with that retailer but can also be accepted generally by other merchants. Typically, the retailer adopts a co-branded partner such as Mastercard, Visa, or American Express. The card operates across the existing card networks.

Why Large Merchants Embrace Co-branded Cards

Visa, Mastercard, and Amex (the card networks) generate record margins. So are the banks that issue payment cards and their partner Airlines and Hotel groups. During Covid, it was established that the co-branded card schemes of the Airlines and the Hotel groups were worth so much that the banks were only willing to lend to these businesses based on having their co—branded card programs as security for loans.

So Why Aren't More Mid-size U.S. Retailers Embracing Co-branded Network Cards?

Setting up a co-branded card program has been cost-prohibitive for retailers other than the very large retailers like Costco and Target. However, innovation has transformed this landscape, making the business case for co-branded card programs much more compelling.

Bankhawk helps retailers to formulate a strategy for their co-branded card programs. Our payments experts help to guide teams in large merchants to leverage the value of their customer loyalty programs to create or increase the value of their card programs.