November 28, 2008
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News: Branded vs. Co-Branded Credit Cards.
We started the season today that generally fosters the largest influx of branded credit card applications. Record turnout is always anticipated on the busiest shopping day of the year. In some ways branded credit cards are the same as industry credit cards and in other ways they're different. So, a little insight on the differences may be helpful in these days of enticement. Much of it comes down to the motivation of these retailers.
It's probably a no-brainer to mention that the retailers' prime interest is to get more business right now. This is evident in the presentation that, opening one of their brand of credit card accounts at the moment can save the consumer 10% to 20% on purchases on the spot. This is usually a great deal for most people who are credit-worthy. But in this changing credit card climate, it may be helpful to be informed of some of these changes.
In the past retailer-issued accounts were primarily intended to be used only for shopping with that retailer. Now that's changing. Co-branding is increasing shopping flexibility, but stricter rules are being applied concerning credit worthiness. These new accounts are linked to industry with Visa, MasterCard and other large regulating associations who balance consumer, retailer and lending industry protections. The protections are generally better, but qualification standards are generally more strict. With co-branding, credit card holders are not limited to use the cards only at one store, they can shop anywhere the card is accepted.
Some retailers have found usefulness is staying with only their own enterprise. It's no secret that our current credit card crunch has come at a really bad time for the retailers and they find value in having greater control in who qualifies to make more expensive purchases at their store.
In addition, the retailers enjoy the benefit of building reciprocating loyalties with their customers by catering to each others' needs. In addition to convenience, they can offer their own ‘special' discounts in their own way without competing with an industrial credit card overseer who competes with it's own variety of discounts.