Store-only credit cards in comeback — but retailers go to new payment preferences

Payments with private-label credit cards picked up after dropping sharply during the pandemic. 

Transactions and dollar volume for private-label (store-only) credit cards dropped sharply with the onset of COVID-19, but experienced recovery in the second half of 2020, with receivables estimated at $142 billion for that year, according to Packaged Facts’ Private Label Credit Cards in the U.S.

Through much of the 20th century, credit cards offered by retailers were the most widely used form of credit. The cards were issued by, managed by, and negotiable only at the specific retailer. 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 malls’ leading retailers hurt the portfolios of card program managers.

Also factoring in are the changing payment preferences of Millennials and Gen Z.

"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,” said Elizabeth Rowe, analyst for the Packaged Facts report. “Large retailers and their store card/loyalty programs are therefore pivoting and partnering with BNPL digital solutions for their online customer dollars.”