August 19, 2010
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News: Private Label Credit Cards Rebounding
It was only a couple of years ago when consumers began to realize that private label credit cards cost more to use. The realization along with the recession deemed the private label to be unstable and a bad investment. Some merchants went so far as to eliminate their co-branded credit card; many had no choice when their card issuer decided to eliminate poor performing portfolios. A large portion of these portfolios consisted of sub-prime customers and carry higher interest rates with lower credit limits. Nevertheless, there are several co-branded credit cards still in circulation and the latest statistics indicate that the private label market has made a significant turnaround.
Target reported credit card delinquencies of 60 days or more decreased to 5 percent down from 5.8 percent the same time last year. The retail giant more than doubled its card segment profits for same period last year to $149 million up from $63 million in 2009. Nordstrom's credit cardholders also improved on paying back debt. Cardholders paid back 27 percent of their debt during July; 1.52 percent more than the same time last year.
Overall, U.S. cardholders reduced credit card debt. According to a recent Nilson Report, merchants' private label cards totaled $94 billion last year; down 8 percent from the previous year. Cardholders in all categories other than the private label cards reduced their card debt during 2009 to $1.89 trillion, a 13 percent decrease from the previous year. Meanwhile, card issuers are taking a different approach to the private label card. GE had its private label card portfolios up for sale earlier this year, but has since pulled them of the sales block because they have begun to do better. On the other hand, Citigroup's private label cards haven't seen the same positive results. The bank continues to sell them which includes Sears and Macy's.