Many retailers, websites, manufacturers, sports teams, nonprofit organizations and other independent businesses offer their own credit cards to clients and customers. These private-label credit cards carry the organization's name, colors and logo. They are a way for organizations to advertise and promote their goods and services and help companies develop loyalty among their customers and clients.
Issuers
Large organizations may issue the cards and manage the accounts. For smaller companies, banks such as Wells Fargo and Citigroup typically issue the cards after signing an agreement. The banks establish a line of credit with the company, which is used to finance the purchases made with the private-label card. The bank also handles the accounts by setting credit requirements for cardholders, mailing out statements, accepting payments and charging fees.
Applications
Customers apply for a private-label card just as they would for a bank's credit card: by filling out an application and giving a Social Security number used for credit screening. The process can be done almost instantaneously through the issuer, which establishes the guidelines for issuance of the cards to individual applicants. Many companies also offer an online application, allowing approved applicants to begin shopping immediately from their homes.
Promotions
Some private-label credit cards can only be used for purchases at the company using the program. Many retailers use private-label credit cards to encourage customer loyalty, offer discounts on merchandise and boost sales. They can also advertise promotions, sales and seasonal offers through inserts included with the billing statements.
Incentives
The card may offer a variety of incentives for use. A first-time customer making a credit application for a private-label card, for example, may be offered a 10 percent discount on an initial purchase with the card. A minimum monthly purchase amount may trigger another discount or points in a rewards system; a minimum number of on-time payments may also benefit the cardholder with a reduced interest rate.
Familiar Logos
Along with the company name and logo, most private-label cards carry the familiar Visa or MasterCard logo, allowing the cardholder to use the card at any retailer, restaurant or business organization that accepts credit-card payments. This convenience encourages repeat use of the cards and improves acceptance of the cards among prospective clients and customers.
Debt Issues
Private-label credit cards can be useful for retailers, but for customers the usual dangers that result from the use of easy credit are present. Private-label cards can encourage the purchase of items that a customer can't afford and increase the burden of outstanding debt on a household. In addition, credit scores are affected by the number of open accounts, and holding several private-label cards, with or without high balances, can negatively affect a credit report.
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