Store-Only Credit Cards: The Future of the Past

Press Release
Jul 14, 2021

ROCKVILLE MD, July 14, 2021 – As reported in Packaged Facts’ Private Label Credit Cards in the U.S., transactions and dollar volume for private-label (store-only) credit cards dropped sharply with the onset of COVID-19, but then experienced recovery in the second half of 2020, with receivables estimated at $142 billion for that year. 

The historical trajectory for store-only cards reflects at once the intransigence and the mutability of the past. The first large-scale offering of consumer credit was by retailers that found it profitable to extend credit to their customers so they could pay for goods over time. Post-World War II America experienced an explosive growth in new single-family housing and those households needed refrigerators, washing machines, and vacuum cleaners. Americans could afford those purchases, but not all at once out of their next paycheck. They needed access to credit so they could pay for those big ticket items over time, just like they made payments on their homes and their cars.

Through much of the 20th century, these cards were the most widely used form of credit, and they were issued by, managed by, and negotiable only at the retailer whose name graced the front of the card. In recent decades, however, private-label card use has been stagnating, buffeted in part by competition from general use retailer credit cards that are co-branded by Visa, MasterCard, or American Express.

The setback to malls and brick-and-mortar retailers inflicted by the COVID-19 pandemic further damaged the performance of leading private-label credit card issuers.  The bankruptcies and large-scale store closings of some of their largest partner retailers—including Ascena (owner of Ann Taylor and Loft), Brooks Brothers, JCPenney, and Neiman Marcus— hurt the portfolios of card program managers.

Also factoring in are the changing payment preferences of Millennials and Gen Z.  As noted by Elizabeth Rowe, analyst for the Packaged Facts report, “younger adult shoppers are demanding access to point-of-sale (POS), buy-now, pay-later (BNPL) offers that let them pay for purchases in four equal installments, interest free, while receiving their purchased item as soon as the first payment is made.” Large retailers and their store card/loyalty programs are therefore pivoting and partnering with BNPL digital solutions for their online customer dollars.

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