Executive Summary

When shopping online or in-store, many consumers receive offers or other discounts to sign up for a credit card in partnership with a retailer. These private label and co-branded credit cards (retail credit cards or store credit cards) represent a substantial part of the consumer credit card market, especially for consumers with lower credit scores. Despite the decreased use of store cards in the past few years, over half of the top 100 retailers offer some type of store card in partnership with a major issuer, and it is still the case that one out of every four credit card accounts (and closer to one in three for consumers with subprime scores) is a store card, with over 160 million open accounts in 2024.¹ For merchants and issuers specializing in retail credit cards, the revenue from these products can have a substantial impact on the companies' profits. Yet these partner relationships may incentivize behaviors that create the potential for consumer risk. From our analysis of the size, history, dynamics, and players, we identify a few key findings about retail credit card partnerships² :

• Retail cards can be more expensive than general purpose cards: 90 percent of retail cards reported a maximum APR above 30 percent, compared to only 38 percent of non-retail general purpose cards.³ Furthermore, since many private label cards have a fixed APR, all cardholders, regardless of creditworthiness, are charged the same rate. In December 2024, private label cards for the top retailers had an average APR of 32.66%.
• Use of less restrictive underwriting can put consumers at greater risk of a debt they cannot afford. Private label store cardholders are more likely to carry a balance and more likely to make only the minimum payment than consumers with general purpose cards.⁴ Additionally, the annualized charge-off rate for private label cards is nearly double the rate on general purpose cards. Promotional financing, like deferred interest, may increase a consumer's propensity to carry debt on a store card.
• Four large banks issue over 80 percent of retail credit cards. ⁵ A few specialized banks issue the majority of private label and retail co-brand credit cards with the largest merchants. Exclusive long term contracts and high costs of entry contribute to concentration in the retail credit card market amongst these few large issuers.⁶
• Half of retail card applications are submitted at the point of sale, and consumers report experiencing aggressive sales tactics and inability to redeem promotions. Marketing initiatives such as loyalty programs motivate retail card applications. But consumer complaints submitted to the CFPB and new stories suggest that retailers sometimes use aggressive sales tactics to sell cards. Additionally, consumers who applied for store cards to redeem promotions report being unable to redeem them after receiving the card.
• Profit sharing agreements between retailers and issuers may motivate increased marketing to encourage spending. Between 2018 and 2023, income from store cards represented an average of eight percent of gross profits for major retailers. Issuers share with retailers a portion of the interest and fees collected from cardholders, providing a consistent revenue stream in addition to a merchant's sales. This dynamic may contribute to retailers' incentives to market credit cards and use discounts and other promotions to encourage spending.
• Consumers report significant confusion about the products they signed up for. Consumers report receiving credit cards when they believed they were registering for a free loyalty program. Consumers also describe receiving a different card than they applied for or being migrated to another card without sufficient notice. In other complaints, consumers indicate that they had been signed up for add-on insurance products without realizing.
• Large retail credit card issuers increased the cost of their cards in 2024 through paper statement fees and higher APRs. The largest private label retail card issuers sent change-of-term notices to retail cardholders in 2024 that added paper statement fees and increased APRs.⁷ The CFPB has observed an increasing number of complaints related to paper statement fees on store cards. In addition, complaints show ongoing frustration with late fees that consumers pay on their private label store cards, which make up a disproportionate amount of late fee volume compared to their share of account volume.⁸

Taken together, the market dynamics and common themes from consumer complaints submitted to the CFPB suggest that heightened risks in the retail card market deserve separate attention.

Background

As of 2024, over half of the top 100 retailers by sales revenue offer some type of retail store credit card.⁹ Retail store credit cards are products issued by banks in partnership with major retailers. These credit cards are commonly offered by department store, furniture, home improvement, jewelry, and electronics merchants, as well as a few large grocery chains. Retail store cards include both "retail co-brand" and "private label" products, and throughout the report, where "store credit card", "retail credit card", or "store card" is used, both co-brand and private label products are included. For the purposes of this report, all references to store and retail cards include only credit cards and do not include debit or prepaid cards.

• "Retail co-brand" credit cards are general purpose cards that carry the retailers' branding, and sometimes the issuer, and can be used at a wide variety of merchants by transacting over a network (such as Visa, Mastercard, Discover, or American Express).¹⁰
• "Private label" credit cards are linked to an open-end, revolving credit account that can only be used at one merchant or a few retailers related to a common brand or holding company.¹¹ They are marketed with the branding of the retailer but not a major network, like Visa or Mastercard. However, not all private label cards are store cards, as some private label products like fleet cards meaningfully differ from the typical consumer retail credit card.¹²

Market Size

Retail credit cards represent a significant part of the consumer credit card market, generating $218.85 billion in purchase volume on private label store cards in 2022, compared to $5.45 trillion on general purpose cards.¹³ Consumers currently owe over $63 billion on private label products, about 5.7% of overall credit card balances.¹⁴

Store credit cards are generally more accessible than other products to consumers with low or no credit scores. For consumers with scores between 620 and 720, approval rates on retail cards are roughly 20 percentage points higher than on general purpose cards.¹⁵ Consumers with lower credit scores also hold a larger portion of store card debt - the Federal Reserve estimates that over 60 percent of balances on store cards are held by consumers with credit scores below 720.¹⁶

Financing large purchases like appliances or furniture may be cheaper with store cards than general purpose cards when promotional terms apply.¹⁷ Consumers may benefit from the discounts and status that often accompany store cards if they pay their balance in full. Some card issuers have also introduced new features on their products in an attempt to better compete with Buy Now, Pay Later or other offerings.¹⁸ For these reasons and more, store card balances remain high.

However, store credit cards have become less popular over the last decade as the number of consumers holding a store card has gone down dramatically. In 2015, over 60 percent of consumers reported having a store card compared to only 38 percent in 2024.¹⁹ The number of private label accounts steadily fell from 253 million in 2018 to 161 million in 2024, compared to 551 million general purpose accounts in 2024.²⁰ Nominal purchase volume and debt associated with retail cards remained largely stable over the same time period while general purpose cards have seen substantial growth.²¹

History

Department stores began offering consumers revolving credit in the mid-twentieth century to attract shoppers and boost sales by allowing consumers to receive the product up front but pay back the cost over time.²² This was in contrast to other offers like layaway programs or credit programs that required payment in full at the end of each month. In the post-war era, offering credit distinguished larger retailers from smaller rivals.²³ Credit departments quickly became table stakes for major stores.²⁴ However, funds that retailers allocated to funding credit was at the expense of investment in merchandise,²⁵ and retailers needed to employ staff like bookkeepers and bill collectors to service accounts.²⁶ The associated interest income did not necessarily cover both the program expenses and the opportunity cost of funds.²⁷ Therefore, while many stores did not profit from offering credit; instead, they provided consumers with revolving accounts to build brand loyalty and win customers by providing people the option to finance purchases.

The bank credit cards that arose in the following decades were in many ways a product of the revolving credit system popularized by retailers. Some retailers resisted accepting bank credit cards but started allowing customers to pay with general purpose products in the 1980s. Department stores like JCPenney and Neiman Marcus viewed Visa and Mastercard credit cards as competitors to their credit programs.²⁸ Consumers with a general purpose card could finance purchases at any merchant that accepted the network, further enabling people to shop on price rather than credit access.²⁹ Additionally, the cost of accepting credit cards- or interchange rate - was high for merchants at roughly 4 percent of purchase volume.³⁰ However, as general purpose credit card profitability increased in the late 1970s and early 1980s,³¹ networks and issuers halved the interchange fees charged to merchants, and many large retailers began accepting general purpose cards soon after.³²

Store cards remained valuable to merchants' business models even after retailers running their own credit programs became less common. Merchants instead partnered with third parties, like General Electric Capital Retail (currently Synchrony Financial), to finance revolving credit by using the third-parties' access to capital markets.³³ Through this partnership, retailers would still benefit from the increased sales associated with a credit program carrying their branding while the "private label" issuers would profit off the interest and fees from the consumer credit.

Research suggests that merchants largely benefited from the savings associated with outsourcing credit card lending to specialized lenders, given the issuers' economies of scales, specialized knowledge, and greater capacity to withstand risk.³⁴ By the Great Recession, most major retailers had sold the loans in their credit card portfolios to banks, but they remained involved in the decision making for these programs by entering into issuer-retailer partnerships that now define the store card market.³⁵

Partnership Dynamics

In this section, we first analyze common themes in the partnership agreements between retailers and issuers offering store credit cards, before transitioning to the financial impact of these programs on each party individually. For the purposes of this section, we treat agreements governing co-brand and private label credit cards together, as some contracts address offering both products, but there may be meaningful differences between the terms associated with the two types of store card. Yet regardless of the product type and exact compensation structure, the majority of payments flow from issuers to retailers and can represent a meaningful income stream for major merchants.

The specifics of each store credit card partnership may differ, but often share a common structure. That is, they include program objectives, product value propositions, delineations of operating responsibilities, service-level requirements, marketing obligations, data ownership, financial arrangements, exclusivity, and termination rights. A few agreements are publicly available but are often highly redacted and dated.³⁶ However, a few clauses stand out, and we can still broadly describe some aspects of the general relationship between partners offering a store credit card.

The co-brand or private label partnership contracts assign operational responsibilities between the issuer and the retailer. The issuer is typically responsible for core credit operations such as underwriting, credit line management and general servicing of the account, while the retail partner runs the loyalty program, markets the card to their store customers, and even host the application process on their physical or digital assets.³⁷ There may be instances where the bank and the retailer share responsibilities, working together on an area of program operation. For example, in at least two partnerships that we reviewed, the bank agreed to train the retailers' employees to market cards and process applications.³⁸ Additionally, even as the bank has primary responsibility for the cardholder agreement and the retailer controls the loyalty program's terms and conditions, changes to either document that affect cardholders under the relationship may require approval from the other party.³⁹ The agreements foresee and facilitate this need for collaboration. Sample contracts also state that executives and designated employees from each company will meet on a regular cadence and vote on major changes to the card program, like the core value proposition or marketing strategy, as defined by the agreement.

The parties may also agree to share more comprehensive consumer data compared to what is usually transmitted between merchants and issuers. This is particularly true for private label card relationships. For example, a retailer's SKU-level data (stock-keeping unit), which is used to manage inventory and identify specific products or services sold to consumers, may be given by a retailer to an issuer.⁴⁰

Retailers and issuers both profit from earnings on store credit cards pursuant to co-brand and private label credit card partnership agreements. In the majority of cases where the issuer owns the credit card accounts, funds the receivables, and determines the underwriting criteria, it receives interest and fee income generated on the card. The retailer then receives a share of the credit card program's profits, as well as other lump sum payments, such as multi-million dollar signing bonuses, pursuant to the specific agreement. One such type of payment may include issuers refunding interchange fees on purchases with the co-brand and/or private label products.⁴¹ However, while processing the store card may be cheaper than the interchange on other credit cards, the merchant will typically bear the costs of rewards or discounts associated with the loyalty program, in contrast to other issuer branded general purpose cards where issuers provide rewards. If the bank offers cardholders introductory pricing at a low rate or plans with deferred interest, the retailer may help fund those promotions by paying higher swipe fees for those transactions.⁴²

There may be cases for private label cards where the retailer also shares in the losses that are typically borne by the issuer under a certain threshold. Retailers may be willing to accept a share of the losses as they may be interested in reducing the number of store customers that are declined after submitting a credit card application as that may jeopardize the longer-term relationship with the customer. As a result, contracts between retailers and issuers often include mutually agreed upon target approval rates by credit tier. At least one contract stipulates that in the case that an issuer fails to meet a minimum approval rate target, they owe the retailer a penalty payment.⁴³ In one instance, a retailer brought their issuer partner to court to dissolve the breakup over the issuer's underwriting.⁴⁴

Retail credit card agreements often extend for seven years or longer, and with partnerships continuing for decades.⁴⁵ The longer-term nature of the agreements may reflect the time required to generate a sufficient financial return relative to the upfront capital investment needed to establish a new partnership or renew the value proposition of an existing program. With each renewal, the financial arrangement between parties may be updated with both parties seeking to increase the financial value they obtain from the card program relationship. This may include new marketing commitments designed to increase the number of retail customers that apply for the store card along with an increasing share of the economics from issuer to retailer.

Generally, the issuing bank will be the exclusive provider of credit cards for a given retailer under these agreements. However, some contracts include provisions that allow the retailer to establish a "second look" program with a different issuer for declined applicants.⁴⁶ These provisions also provide guidelines and restrictions on a retailer's potential second look program. Second look partnerships can also exist between issuers and servicers (companies who operate a credit program but do not originate loans) who choose to offer their combined services to retailer partners.⁴⁷

Exclusivity measures in these partnership agreements can exist both within the operation of the card program, as well as outside the program to other retailer or bank activities. For instance, issuer partners may reserve the right of first refusal to provide additional credit products with the retailer, like debit cards or installment plans. Partnership agreement contracts may also place boundaries on how retailers interact with other payment or credit providers, for instance, forbidding the retailer from offering a deferred payment product with the retailer branding, or requiring that the credit card be promoted more prominently than any other credit product. There may also be additional exclusivity clauses after program termination, including restrictions on the sale of accounts to a retailer's competitors. Comparisons to a retailer's competitors may also factor into card pricing, where contracts may stipulate that program economics, including APR rates, fee amounts, and fee assessment practices, are "reasonably competitive" with other private label credit card programs that are listed in the contract.

Retailers changing credit card issuers is infrequent, but not entirely uncommon, and the transition can cause consumer dissatisfaction if poorly handled.⁴⁸ If the parties choose not to continue with the partnership, the contract will typically stipulate a process for soliciting competing bids and selling the existing credit card portfolio to a new issuer. Requests for proposals (RFPs) can generate competition among the very limited number of issuers offering store cards that choose to participate in the bidding process. Each issuer will propose financial remuneration terms for the retailer and highlight unique marketing or technological capabilities.⁴⁹ The flurry of activity around a portfolio's sale exists only with the promise of a long-term, exclusive relationship against the backdrop of a concentrated store card issuer market with a limited number of major retailers.

Credit Card Issuers

A handful of specialized issuers dominate the retail credit card market. Synchrony Financial, Citibank, Capital One, and Bread Financial are the primary issuers offering retail credit cards. These four banks combined issue over 80% of store cards and hold over 80% of market share by purchase volume and outstandings.⁵⁰ TD Bank, Barclays, Wells Fargo, JPMorgan Chase and a few others offer only a limited number of store cards.⁵¹ These co-brand and private label issuers benefit from economies of scale for account management, debt collection, and sophistication of specialized knowledge for store card partnerships. They are also able to leverage their balance sheets and access capital for funding loans through channels like deposits and securitization.⁵²

Private label issuers generally have less restrictive underwriting than issuers offering only general purpose products. Retailers want as many of their customers as possible to qualify for their store card, but issuers also need to consider the additional losses associated with greater approval rates than general purpose products.⁵³ The annualized charge-off rate on private label cards hovered around 10 percent (nearly double general purpose products) prior to the pandemic and remained higher in 2021 and 2022 even as delinquency rates declined across the market.⁵⁴

Store card issuers charge consumers higher interest rates and greater fees than general purpose credit cards, partially due to less restrictive underwriting and the lack of meaningful interchange economics on private label cards.⁵⁵ The total cost of credit (a measure that the CFPB reports in its biennial credit card report that includes the cost of both interest and fees) on private label products as a share of balances is consistently four to six percentage points higher than on general purpose cards.⁵⁶ Higher APRs on a greater portion of revolving balances explain part of the difference.

However, issuers do not only charge higher interest rates to consumers with lower scores -private label cards tend to have fixed annual percentage rates (APRs) that do not vary based on a consumer's creditworthiness, a model that has largely been eliminated in general purpose cards.⁵⁷ Lack of risk-based pricing on private label cards may indicate that issuers find consumers are less price sensitive to APR on these products. It is also possible that retailers want to charge one price for the sake of simplicity. Store card issuers also charge a disproportionate percentage of late fees compared to their share of accounts.⁵⁸ One explanation of this phenomenon is that consumers stop paying store cards first when experiencing financial distress and prioritize other bills instead,⁵⁹ but private label issuers also rely on late fee income to generate profits, with these fees representing 25 percent of consumer charges compared to seven percent of interest and fees on general purpose products.⁶⁰

Retailers and Credit Card Programs

For major merchants, retailers' credit card income can represent a meaningful percentage of its core operating income, defined here as gross profit (sales revenue minus cost of sales). As discussed above, large merchants receive a share of net earnings on store cards they issue in partnership with major banks, often reported as a part of "other," non-merchandise income.⁶¹ One reason why retailers value credit card income is because the revenue sharing is usually already net of losses and expenses, and the merchants typically do not incur significant operational costs for these programs, boosting net earnings. Store cards may also drive retailer profits in less measurable ways, like indirectly boosting sales volume by encouraging larger basket sizes at checkout.

Figure 1: Credit Card Income as a Share of Gross Profit

Credit card income represents up to 14.8% of gross profit for selected major retailers

Source: 10-K annual filings in S&P Global. ⁶²

To measure the relative contribution for credit card programs to core retail operations, we compared card revenue to gross profit. From 2018 through 2023, credit card revenue represented an average of eight percent of gross profits for a sample of major retailers in Figure 1 that regularly disclosed it in their annual filings. In 2020, credit cards' contribution to retailers' gross profit spiked as sales dropped, but it has since returned to pre-pandemic levels. In the post pandemic period from 2021 to 2023, card revenue represented about 1.5 percent of total retailer revenue. However, the contribution of card revenue as a percent of net income, which in some cases was impacted by one-time items such as restructuring costs, was about 36 percent. It is not clear if these merchants are representative of the larger sample of retailers who do not regularly disclose credit card revenue in their annual filings.

At least one retailer might not have been profitable without the revenue from retail credit card in the three years since the pandemic.⁶³ This is not a new finding: prior research found that department stores increasingly relied on credit card revenue from 2011 through 2016.⁶⁴ One private label issuer made comments that they expect to offset a significant portion of any loss in late fee charges by reducing retailer partnership compensation when asked about their reaction to the CFPB's rule to reduce the typical late fee from over $30 to $8.⁶⁵

The existence of a store card program can also have an impact on consumers more broadly. Store cards may create the opportunity for differential pricing of goods or services between cardholders and non-cardholders. This can occur when store-branded cardholders receive an ongoing discount, generally in the form of cash back, on the general purchase of goods or services, while customer that choose to pay with cash or other competing cards will effectively pay one to five percent more for the same goods and services, depending on the level of discount afforded to store-branded cardholders. This can be increasingly important to consumers who receive discounts for essential or everyday items, typically at big-box stores or grocery chains, that offer discounts when paying with their store credit cards. It can also be a meaningful tactic that retailers use to steer customers to use store credit cards for everyday transactions.

Loyalty Programs

Many stores offer a loyalty program where consumers can earn discounts or receive other promotions by linking their purchases to an email or phone number in addition to retail credit card products. Of the top 100 retailers, 73 offer some version of a free loyalty program. Loyalty programs are important to issuers, even though they are operated and owned by the retailer. The value proposition associated with a store card is closely tied to the value provided by the loyalty program, which is why any changes to the loyalty program, as mentioned in Section 4, must be approved by a retailer's issuer partner.

In recent years, retailers have begun to refresh or revamp their programs in the hopes of attracting more sales. Some of these updated loyalty programs are multi-tiered, where the initial tier is free to join, but additional paid tiers offer better rewards and promotions.⁶⁶ Other iterations of tiered loyalty programs are based on annual spend, where consumers have a status based the amount they've spent with the retailer. In this model, meeting certain spending thresholds allows a consumer to move to higher tiers with better rewards.

If a retailer offers both a credit card and a loyalty program, the credit card will represent the highest tier of the program, offering the largest discounts that would be otherwise inaccessible to consumers. For some loyalty programs based on annual dollars spent, cardholders can automatically "cut the line" and get upgraded to a higher loyalty status without meeting the minimum spend requirement. In both the subscription and annual spend models, marketing materials may promote the loyalty program side by side with the credit card, associating the two together. Often, the best discounts, even for the most loyal shoppers, can only be accessed as a cardholder.

The integration of loyalty programs and store cards allows retailers to collect more granular data about customer spending. Loyalty programs alone capture valuable customer data that can be monetized and sold to third parties, in addition to being used by the retailers themselves.⁶⁷ The ability to combine the insights from a loyalty program with those from a credit card allow retailers to gain more nuanced insights on the purchase behavior of consumers and create even more individualized marketing and promotions.⁶⁸

Marketing

Consumer interaction with retail credit cards begins even before an application is submitted, when a consumer sees marketing materials and advertisements. Both the issuer and the retailer engage in marketing, with party-specific obligations described in their partnership agreements. Typically, each party is responsible for marketing in their own distribution channels, with materials subject to the approval of both parties.

Aggressive Sales Tactics

Retail workers play a key role in marketing store credit cards, and evidence suggests merchants highly incentivize, or even may require, that workers encourage customers to apply.⁶⁹ Further, retailers, and their employees, are not typically subject to the same level of regulatory oversight as the banks who issue store credit cards.

About half of all retail credit card applications are submitted in person, presumably at the point of sale.⁷⁰ The short checkout window leaves little time for the worker to answer questions or provide clarifications about the product. Especially for complex terms like deferred interest as discussed in Section 7, employees may lack sufficient training to handle complex customer inquiries. While clerks may receive some level of compensation per application or approval, news stories suggest incidents of workers being penalized for not meeting certain quotas.⁷¹ In fact, union representatives previously stated that proposals to increase credit card enrollment were a point of negotiation in contract renewals.⁷²

In 2019, the CFPB took enforcement actions against a retailer who was found to be opening store cards without consumer consent and misrepresenting to consumers the financing terms associated with the credit-card accounts.⁷³

Consumer complaints show that some consumers feel that store employees use aggressive sales tactics at checkout. One consumer wrote that "the clerk was being insistent after I had already declined [credit card] several times".⁷⁴ Another consumer shared a similar experience, where a manager was "very pushy about a credit card", even after the consumer declined it multiple times. The consumer continued, explaining that the experience "made me uncomfortable so I left without making a purchase".⁷⁵

The primary reason consumers report opening a store card is a discount or promotion on a specific purchase.⁷⁶ This is motivated in large part by the competitive sign-up bonuses and other advertised incentives for cardholders. CFPB market monitoring observed one sign up bonus as high as a $200 gift card for one co-brand card⁷⁷ and cashback offers as high as 10% for one private label issuer.⁷⁸ Some retailers also offer additional discounts that expire after a short promotional window, prompting consumers to spend quickly, or lose the offer.

Consumers have indicated in complaints, however, that they are not always able to redeem the offers as advertised. One consumer recalled applying for a card to get a discount on a current purchase:

"When checking out I was asked if I wanted to sign up for their credit card and get 15 percent off. I confirmed by asking 15 percent off this item I am buying now. I was told yes, it will be deducted after the return window of two weeks. Instead I was issued a gift certificate with an expiration date enticing me to buy more items from their store."⁷⁹

Other consumers shared being unable to redeem advertised promotions due to delays in their application or processing. In another complaint, a consumer explained that they applied for a card to receive 20% off a large order. They received a pending status, and were subsequently approved, and received their card in the mail 3 weeks later. But the complaint then indicated that the issuer's customer service told them that they would receive a statement credit for this introductory offer, but the credit was never received.⁸⁰

Another set of consumers stated in complaints that they were similarly denied promotions that they expected to receive. One consumer attempted to amend part of an order to remove an add-on service and lost their promotional discount completely.⁸¹ In another complaint, the consumer indicated that they had an order cancelled by the retailers, and when the consumer tried to repurchase the item with the promotional code, they were unable to redeem it. The consumer also explained the difficulties they had when attempting to resolve the issue with customer service representatives:

"When I explained what happened I was met with a highly unreasonable response and a refusal to honor the discount code that was the reason I signed up for the card in the first place. This is an unfair and possibly deceptive practice to entice people with discount codes to sign up for their credit card, then make it difficult to reach a person who can help, then refuse to honor the discount when someone does manage to get through. This company has no controls in place to ensure that discount codes are honored and reinstated when a purchase does not go through. Instead, they apparently leave it to the customer to struggle through their automated phone system until they give up on it."⁸²

Applications

Retail credit cards receive fewer applications compared to general purpose products. In 2022, consumers submitted over 77 million retail card applications to mass market issuers, which is down from 88 million applications in 2021.⁸³ Figure 2 shows the distribution of retail card application by credit tier over time. Consumers whose credit scores are subprime and deep subprime submit the highest number of applications, followed by consumers with no credit score.

Figure 2: Retail Application Volume for Mass Market Issuers by Credit Score Tier

Almost half of all retail card applications are submitted by consumers with subprime, deep subprime, or no credit score.

Source: 2023 Consumer Credit Card Market Report ⁸⁴

While application numbers are lower for retail cards compared to general purpose cards, approval rates for retail cards are higher. Store card approval rates are six percentage points higher at 50%, compared to the 44% approval rate of general purpose cards.⁸⁵

Originations

Originations for private label accounts have decreased over the past decade, with less than 22 million new private label cards opened in 2023, compared to over 46 million in 2015 and over 41 million in 2019.⁸⁶ Despite declining originations, private label cards still make up one in four credit card accounts.⁸⁷ Store card originations tend to be seasonal, peaking in November and December as retail sales volumes are high during the holidays.

Originations are particularly important to the retail card business model, as these cards have high rates of customer churn. Store card profitability, for both issuer and retail partner, depends on high levels of new card sales to offset high attrition levels. Average annual attrition on private label cards is 10 percentage points higher than general purpose cards, at 19 and 9 percent, respectively.⁸⁸ Furthermore, store cards are also important to retailer sales more broadly, where store cards make up large segment of retailer purchase volume. For example, one retailer stated that one quarter of their total sales were transacted on their private label cards.⁸⁹

Lack of Clarity about Products

As previously discussed, retailers can offer multiple credit products in addition to free or subscription loyalty programs. Consumer complaints show that there can be a mismatch between what product a consumer believes they are applying for and what product the consumer receives.

Receiving an Unwanted Credit Product

Multiple consumer complaints suggest that customers believed they were signing up for a free store loyalty program instead of applying for a credit product. Consumers stated that only at the last step of the application,⁹⁰ or even after the application was submitted,⁹¹ did they realize they applied for a credit card. One consumer submitted a complaint on behalf of his father, writing that "not once during the transaction was my father notified that this was a store credit card."⁹² Other consumers explicitly recall confirming with store clerks that they were not signing up for a credit product, only to later learn they applied for a credit card.⁹³

In addition to receiving an unwanted credit product, consumers expressed concerns about the impact of the store card application. An application for credit typically results in the issuer furnishing an inquiry to the credit bureaus, which may have a negative impact on consumers' credit scores. One consumer explained their experience at the checkout:

"As the clerk explained the discount, it was my understanding that this was to sign up for the store's loyalty program and NOT a [credit] card … I did not and do not want this inquiry on my credit report, as I was led to believe that this was for a loyalty program and not a [credit] card for the store."⁹⁴

Receiving Private Label Card Rather Than Co-brand Product

Banks that issue multiple cards in partnership with a retailer will offer their co-brand card to higher credit score customers and their private label product to consumers with lower scores. When a consumer applies, however, it is sometimes not clear which product they are applying for. Some consumers mentioned believing they were applying for one product, but once the application is processed, they received a different product entirely.

One consumer recalled applying for a store card at checkout after the cashier had confirmed they were applying for a co-brand card. However, "upon arrival of the card, it was not a [co-brand] but a store card" - meaning a private label product.⁹⁵ Another consumer was similarly surprised after seeing an online offer for a card:

"As I was browsing the [merchant] website, an offer for a pre-approved [co-brand] popped up. I accepted the offer. Today, the card came and it is a store card - not a [co-brand]. I have cancelled the card. This is a bait and switch to deceive people into accepting a store card that they do not want."⁹⁶

Companies may not make it clear how consumers are routed between private label and co-brand products during the application process, making it difficult for consumers to know why they received one product over another. Consumers may have a clear preference between the two cards: while private label products have the benefit of extending credit to consumers who might not otherwise be approved, consumers with a private label card are restricted to shopping at that merchant, limiting their ability to comparison shop.

Second Look Products

As mentioned in Section 4, some retailers will offer second look cards, also known as alternative financing, to consumers whose initial card applications were rejected. Second look products, which can be private label or co-brand, are issued by a different bank than the bank issuing a retailer's primary cards. Agreements between a retailer and issuer for their primary card program will often include clauses restricting a retailer's potential second look program. For instance, the agreements note that the second look products must be meaningfully distinguished from the card offered by the issuer in the card's design or in-store marketing.

Issuers that specialize in second look programs may seek to partner with retailers or other issuers with the proposition to "monetize declines". When an applicant is rejected from a retailer's primary lender, their information is typically automatically routed to a second look servicer that considers the applicant for one of their products. From the consumer's point of view, they may see rejection from the primary lender and a prequalified offer from a second look servicer at the same time. It is unclear how consumer consent is captured in this process.

Second look retail card products are often serviced by a non-bank credit program that will manage the card program, including providing the point-of-sale technology necessary to route consumers information across issuers. Consumers will more likely be familiar with the name of their credit card servicer, like Fortiva (cards issued by The Bank of Missouri) and Concora (cards issued by First Electronic Bank), than the bank that is issuing the loan.

Second look cards are priced higher than the private label card that a consumer may have originally applied for, which may reflect the incremental credit risk to the lender. For example, one retailer who offers both a primary and second look card has a 28.99% APR associated with their primary private label card, and a 35.99% APR and $99 annual fee on their second look private label card.⁹⁷

The specific pricing models for second look cards differ across servicers and products. In some cases, both the primary and second look issuers will offer a private label card with a single, fixed APR that does not vary based on creditworthiness, with a higher APR on the second look product. At least one second look co-brand issuer offers risk-based pricing based on consumer credit worthiness, and charges additional fees - including an annual fee and an additional cardholder fee - that are not charged on the primary retail co-brand.⁹⁸

Add-On Insurance Plans

Most of the major store card issuers offer an add-on insurance product to their store cards, sometimes referred to as debt protection, that is meant to provide protections in the case of covered events such as illness, disability, or employment. Enrollment in these programs is typically done at the time of card application, which for store cards is most commonly at the point of sale.⁹⁹ Consumers who experience a covered event can file a claim to be able to delay payments for a fixed period or cancel some of their balance. The cost of the insurance is calculated based on cycle ending balances, typically $1-$2 per $100 dollars of the balance.

In 2015, the CFPB took enforcement action against an issuer for deceptive sales practices in relation to these insurance products.¹⁰⁰ The CFPB found that the issuer had been using confusing messaging at the point of sale, which led consumers to enroll in these plans when they believed they were only applying for a store's credit card.

Multiple complaints show that consumers are facing similar problems, sometimes paying for these programs for over 10 years without realizing.¹⁰¹ As one consumer explained:

"I have had that card on auto payment for more than a decade and never look at my statement. Today I reviewed my statements and realized they have been charging me for a "Debt [P]rotection" program that I never knowingly agreed to. In just the past three months, they have charged me more than 200 dollars for this service I never knowingly agreed to and do not want."¹⁰²

The enrollment for these products is often embedded in the store card application flow, which may make it difficult for consumers to discern when they are completing part of a card application and when they are signing up for an add-on product.

Involuntary Migration

Issuers who offer both a private label and co-brand retail card will sometimes migrate consumers from the private label to the co-brand, framing the move as an upgrade. However, some consumers prefer the private label product and submitted complaints about being automatically moved between products without proactively applying. In the complaints, it appears that issuers used an "opt-out" approach, where if a consumer did not respond to messaging about the migration, they were moved to an entirely new credit card automatically. One consumer explained:

"[Merchant] wanted to phase my store card to a [merchant co-brand card]. The letter stated I had to notify them by [date] or they were going to change my [merchant] store card to a [merchant co-brand card]. So if I had not read the document in detail and called to stop this process, [merchant] would have sent a card I did not want." ¹⁰³

The consumer described their frustration with the "opt-out" method of the migration, writing that "consumers receive many credit offers by mail that require approval or activation. Consumers should not have to take any action to deny these multitudes of offers." Consumers who did not opt-out in time found their original store cards cancelled, and new accounts opened. One consumer who experienced migration explained that "without my knowledge or consent, the old store card was cancelled and my charged (sic) were transferred to the new [co-brand card]."¹⁰⁴ The consumer goes on to explain that they even accumulated late fees on the new card due to the conversion, after the issuer migrated their charges but not their payment information.

Involuntary migration can also negatively impact consumers' credit scores. If a consumer wishes to re-open their old product after the card has been closed, they will need to reapply for the card, creating a new inquiry that could negatively impact their credit score. Similarly, if a consumer wishes to close a newly migrated account, they could also see a hit to their credit score from closing an account.

Consumers can also experience involuntary migration when the partnership between an issuer and retailer is dissolved. Sometimes, the accounts are migrated to the retailer's new issuer partner. Alternatively, there have been cases where the issuer maintains the receivables and migrates store cardholders to an issuer branded general purpose card.

Cost

Retail credit cards can be more expensive, in both interest and fees, than other credit cards and other financing options.

Interest

In 2022, average private label APR was 27.7%, compared to 22.7% for general purpose cards.¹⁰⁵ Since then, the Prime Rate has increased while issuers have also increased average APR margin, the amount of interest they charge on top of the Prime Rate, to all-time highs.¹⁰⁶ Many of the issuers who raised APRs on store cards this year cited changes to "market conditions".¹⁰⁷ In December 2024, new cards offered by the top 100 retailers had an average private label APR of 32.66%.¹⁰⁸

As mentioned above, most private label cards charge a single APR for all consumers, unlike other credit cards which charge APRs based on the creditworthiness of the consumer. Private label cards are priced in two ways - either the APR will be a fixed margin plus the Prime Rate, or the APR will be a fixed percentage that does not vary based on the Prime Rate. As a result, the many cardholders charged APRs that are not based on the Prime Rate will not benefit from future cuts to the Prime Rate.

Figure 3 shows that the average APR range of a sample of co-brand and private label cards is higher compared to general purpose cards. Even consumers with higher credit scores, who may be charged the minimum APR on store cards, are paying higher prices compared to general purpose products.

Figure 3: Average Minimum and Maximum Purchase APRs of Retail and General Purpose Credit Cards

Retail co-brand cards have higher average APR minimums and maximums compared to general purpose cards

Source: Terms of Credit Card Plans (TCCP) Survey Data ¹⁰⁹

Retail cards are also more commonly priced above 30 percent APR. CFPB survey data shows that over 90 percent of retail credit cards reported a maximum purchase APR over 30 percent, compared to only 38 percent of non-retail general purpose cards.¹¹⁰ Further, 19 percent of retail cards had APRs above 35 percent, an interest rate that is at or near the legal cap for active duty servicemembers and covered dependents under the Military Lending Act.

Table 1 shows the APRs for private label cards offered by the top U.S. retailers.¹¹¹ The APRs range from a high of 35.99% to 21.99%.

Table 1: Private Label APRs for Top Retailers by Annual Sales and Issue

Retailer	Annual Sales (Billions)	Issuer	APR
Academy Sports	< $10	Bread Financial	35.99%
Big Lots	< $10	Bread Financial	35.99%
Burlington	< $10	Bread Financial	35.99%
Camping World	< $10	Bread Financial	35.99%
Michaels Store	< $10	Bread Financial	35.99%
Petco	< $10	Bread Financial	35.99%
Signet Jewelers	< $10	Bread Financial	35.99%
Discount Tire	< $10	Synchrony	34.99%
J.C. Penney Company	< $10	Synchrony	34.49%
American Eagle	< $10	Synchrony	34.49%
Qurate Retail	$10 - $49	Synchrony	34.49%
TJX Companies	> $50	Synchrony	34.49%
Walgreens Boots Alliance	> $50	Synchrony	34.49%
Macy's	$10 - $49	Citi	33.74%
Dillard's	< $10	Citi	33.49%
Meijer	$10 - $49	Citi	33.49%
Overstock.com	< $10	Citi	33.49%
Tractor Supply Co.	$10 - $49	Citi	33.49%
Nordstrom	$10 - $49	TD Bank	32.90%
Harbor Freight Tools	< $10	Synchrony	31.99%
Lowe's Companies	> $50	Synchrony	31.99%
Best Buy	$10 - $49	Citi	31.74%
Dick's Sporting Goods	$10 - $49	Synchrony	31.74%
Ross Stores	$10 - $49	Bread Financial	31.74%
Ulta Beauty	$10 - $49	Bread Financial	31.74%
Victoria's Secret	< $10	Bread Financial	31.74%
Sephora (LVMH)	$10 - $49	Bread Financial	31.49%
Wayfair	$10 - $49	Citi	31.49%
Kohl's	$10 - $49	Capital One	31.24%
Dell Technologies	< $10	Bread Financial	30.99%
Neiman Marcus	< $10	Capital One	30.74%
Williams-Sonoma	< $10	Capital One	30.74%
Amazon.com	> $50	Synchrony	29.99%
AVB Brandsource	< $10	Citi	29.99%
The Home Depot	> $50	Citi	29.99%
Menards	$10 - $49	Capital One	29.74%
Target	> $50	TD Bank	29.45%
Ikea North American Svcs.	$10 - $49	Bread Financial	21.99%

Source: CFPB data collected based on the National Retail Federation's list of Top 100 Retailers

Consumer complaints show dissatisfaction with the higher price associated with retail cards. One consumer explained that a recent APR increase has left them unable to pay down their bill and even motivated them to close the account:

"The interest rate has [gotten] absolutely exorbitant at 32%!! How does a store use a bank that would do something like this to their customers with the state of the economy right now… I cannot do this anymore. I am willing to close my account. I just can't afford to buy clothing at interest rates like this… I can't even make a dent in this bill."¹¹²

The revolve rate, which is the share of active accounts that carried a balance from one month to the next, is trending upwards for private label cards and is higher than general purpose cards. In 2023, the revolve rate rose to 54% for private label cards, up from 52% in 2022. General purpose cards had a revolving rate of 48% in 2023.¹¹³ Combined with higher APRs on private label cards, this data suggests that consumers are having a harder time paying down debt on store cards, despite owing less compared to general purpose cards. Indeed, percent of consumer that are paying only the minimum due, an early sign of financial stress, is much higher in private label cards at 17 percent compared to 13 percent for general purpose cards.¹¹⁴

Promotional APRs and deferred interest promotions are commonly offered when consumers apply for store credit cards. Many store credit cards have this feature, including those offered by major retailers like Home Depot, Lowes, Best Buy, and Macys. Deferred interest promotions typically offer zero or low interest for a set period of time, after which interest fees imposed on a customer can sharply increase. If a borrower is unable to pay off the full promotional balance of their purchase by the end of the promotional period, the lender will impose retroactive interest, which is calculated and compounded based on daily balances going back to the original purchase amount- not just the remaining balance at the end of the promotional period. In a previous report, the CFPB found that about one fifth of deferred interest promotional balances were retroactively imposed interest charges.¹¹⁵

Deferred interest promotions are often offered as a way to finance larger purchases, with an average promotional purchase amount of $637.¹¹⁶ Since deferred interest is often offered on larger, more expensive purchases, not paying off the balance in full can lead to hundreds or even thousands of dollars in interest charges. For example, a consumer may make a $4,500 furniture purchase on a two-year deferred interest promotion and pay down most of the balance - leaving a $180 balance at the end of the promotional period. Assuming a typical deferred interest APR of 31.99%, that consumer would be subject to a $1,439.55 deferred interest charge, despite already paying $4,320 of the original balance.¹¹⁷

The details of the deferred interest promotions are not always clear when consumers apply for a store card. Consumers said that they were encouraged by sales representatives to open cards with deferred interest plans without fully understanding the terms.¹¹⁸ In one consumer complaint, the consumer explained being surprised after opening a card, not knowing what deferred interest was until they had accumulated thousands of dollars in interest fees.¹¹⁹ Another consumer's complaint expressed frustration at the lack of clarity around deferred interest promotions, writing:

"They do not indicate how much is needed to pay to avoid the deferred interest. They do not specify how much the deferred interest will be. There terms are confusing and buried, to be honest I don't even know where to find them. Let alone the statements do not have transparency around what the promotional periods are and what the fees are if they are not paid off. This is so predatory."¹²⁰

Other consumers reported issues when attempting to allocate payments across multiple offers, leaving them with interest charges when they believed they were paying down their promotional balances entirely. After being surprised to find an interest charge on their monthly statement, one consumer wrote "I was under the impression the payments I was making over the last 12 months were being applied to the promotional balance since that was the very first purchase made with this card and the reason this card was opened".¹²¹ Consumer complaints also reported being told that to set the allocation of their payments, they needed to call the issuer each time a payment is made.¹²² In addition, consumers noted confusion about how much they need to pay each month to pay the promotional balance in full by the end of the promotional period. While issuers may include some of this information in the downloadable account statements, they typically will not provide this amount as a payment option in their mobile or web account management portals that consumers interact with more regularly to make their monthly payments.¹²³

Fees

Private label credit card issuers also charge a disproportionate percent of fees compared to their share of accounts.

Late fees

Private label accounts make up 33 percent of account volume, but represent 46 percent of late fee volume, compared to general purpose cards which represent 63 percent of accounts but 43 percent of late fee volume.¹²⁴ Additionally, late fees make up 25 percent of total interest and fees on private label cards. Late fees on general purpose cards, in comparison, represent seven percent of total interest and fees.¹²⁵

Consumer complaints show that some consumers found the late fees they were charged to be "unjustified"¹²⁶. Multiple consumers indicated in complaints that they believe they paid on time, but their payments were processed a few days later and they were subsequently charged a late fee¹²⁷. Often, these complaints were from consumers who mailed in their payments. One consumer explained that after receiving confirmation that his bill was paid on time, he was charged a late fee:

"Yesterday, I paid my [merchant] bill online on their website. It was paid online well before midnight Eastern time … Today I was charged an unjustifiable $30 late fee on my account. I reached out to [merchant] immediately. I requested them to remove the late fee immediately because I paid my bill on time… This is frustrating to have babysit this account. I love shopping at [merchant] but this is definitely changing my relationship with them."¹²⁸

Another consumer felt that they were inadequately notified of late fees, accruing multiple late fees before the issuer reached out, writing "we had not received any collection or payment reminders until $60.00 in late fees were charged on $2.00 worth of interest. I paid the entire balance off, apparently I was 1 day late on making that payment, and then 60 days later, I'm finally called about being late on a payment."¹²⁹

Paper Statement Fees

Some issuers of store credit cards have also begun to charge paper statement fees, which are charged for each mailed statement a consumer receives. The CFPB has flagged an increased number of complaints related to the administration of these fees, as well as a related increase in Change of Terms notices informing consumers about these fees. In many instances, consumers can avoid paper statements fees only if they opt into electronic statements. Consumer complaints highlight frustration with this new fee, viewing the fee as unfair or unnecessary. As one consumer wrote:

"On my April statement I was assessed $1.99 paper statement fee. We do not use our [merchant] credit card each month or carry a balance - an electronic statement would only get lost in an already too full email account - that I may or may not even know to look for since we do not use this card frequently - thus we could incur late fees. A paper statement fee feels like a junk fee that credit card companies should not be able to access [to] consumers."¹³⁰

Surprise late fees or unexpected paper statement fees, on top of higher-than-average interest rates, can make store credit cards even more expensive for consumers.

Conclusion

Retail credit cards represent a significant portion of the credit card market and a significant source of revenue for many large retailers. Our review of partnership agreements between issuers and retailers reveal that these contracts may create adverse incentives related to the marketing and sale of store cards. Complaints submitted to the CFPB demonstrate that while consumers derive value from these products, there are also areas where consumers report confusion and frustration. Complex products and application processes may obscure pricing or product details, preventing consumers from recognizing the true costs of store cards. The CFPB will continue to monitor the retail credit card market to ensure that issuers and retailers are complying with federal consumer financial laws and to identify additional areas of potential consumer harm.