What Is a Private Label Credit Card?

Private Label Credit Cards Explained in Less Than 5 Minutes

A shopper makes a purchase with a private label card
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Francesco Carta fotografo / Getty Images

A private label credit card is a type of credit card that's restricted to a specific retailer or brand. Businesses partner with a financial institution to offer private label credit cards and share in the profits from transactions.

Private label credit cards tend to have higher interest rates and lower credit limits, but may appeal to consumers who are loyal to a brand or who may not qualify for a co-branded or general-purpose credit card.

Definition and Examples of Private Label Credit Cards

A private label credit card is a type of branded credit card that can only be used with a specific retailer or brand. Banks partner with retailers and brands to extend a revolving credit line to cardholders. The bank provides the funding for the transactions, while the retailer handles marketing the cards and encouraging credit card applications. Citi, Synchrony, and Comenity Bank are examples of private label credit card issuers.

Stores offer private label credit cards to boost sales and maintain customer loyalty. Some private label credit cards are part of the store's customer loyalty program, which allows cardholders to accumulate rewards that can be used as a discount on a future purchase.

Examples of private label credit cards are:

Alternate name: Store credit card, retail card, closed-loop credit card

How Private Label Credit Cards Work

Retailers or brands partner with a bank to offer credit cards that incentivize customers to shop within the store. The bank approves new cardholders, finances transactions, and handles payments from cardholders. In turn, the retailer markets the product, soliciting new applications in-store and online.

The bank and retailer share the profits from private label credit card transactions. Merchants may get the added benefit of avoiding payment processing fees on transactions that rely on the card provider's payment system. This makes private label cards more profitable for retailers since processing costs can be more than 4% per transaction with regular credit cards.

Consumer Purchases

As with other types of credit cards, private label cardholders can make purchases against their available credit lines and are required to make a minimum payment each month to avoid being charged a late fee. Unless a promotional rate applies, interest accrues on any balance carried beyond the grace period.

Loyalty Rewards

Private label credit cards often offer rewards, discounts, or other incentives to cardholders. These rewards usually can be used only with that specific store or brand, which makes them less flexible than major credit cards or even co-branded credit cards.

Co-branded credit cards include both the store's branding and major card network's logo (Visa, MasterCard, or American Express) and can be used anywhere the card network is accepted.

Promotional Financing

Private credit cards may also offer promotional financing allowing the cardholder to repay the balance at a low interest rate, 0% interest, or deferred interest. Promotional periods may last up to 60 months. During these periods, the merchant pays the card issuer to make up for lost interest revenue. The longer the promotional period, the more the merchant will have to pay the bank partner to compensate for the lost interest.

Taking advantage of a special financing offer can help you to pay off a large purchase with no interest. However, it's important to understand whether the interest promotion is truly a 0% APR or deferred interest. Under the latter, you'll need to pay the full balance before the promotional period ends. Otherwise, the full amount of interest dating back to your purchase will be added to your balance.

Do I Need a Private Label Credit Card?

Because they're not backed by a major credit-card processing network, you can usually only use them at the retailers or the retailers’ sister brands. For example, you can use an Old Navy store card for purchases at Gap, Banana Republic, and Athleta. This is the main drawback of using a private label credit card—they don't offer the versatility of a major credit card.

Private label credit cards tend to have higher interest than other credit cards, too, which makes carrying a credit card balance more expensive.

Some retailers may require you to forgo earning rewards on your purchase if you choose promotional financing.


It may be easier for consumers with new or damaged credit to get approved for a private label credit card, so these can be a good option for building your credit. After establishing a positive payment history with the private label card, it may be easier to get approved for a major credit card.

Pros and Cons of Private Label Credit Cards

Pros
  • Can earn rewards

  • Easier to qualify for than other types of cards

Cons
  • High APR

  • You can’t use them everywhere

  • Deferred interest

Pros Explained

  • Can earn rewards: Some store credit cards offer rewards that you earn on purchases. In many cases, you can use those rewards for discounts on future purchases.
  • Easier to qualify for than other types of cards: Retailers tend to approve applications from a wider range of applicants, including those with bad credit.

Cons Explained

  • High APR: The average retail credit card has a higher interest rate than non-retail credit cards.
  • You can't use them everywhere: Private label cards restrict you to using the card at the retailer and, when applicable, other brands within the company.
  • Deferred interest: While deferred interest can help you save money if you pay off your purchase by the end of the promotional period, it can cost you hundreds of dollars in interest (depending on the original purchase size) if you can't pay off your balance by the deadline.

Alternatives to Private Label Credit Cards

Co-branded credit cards offer many of the benefits of private label credit cards, like the ability to earn brand-specific rewards and discounts, but you can use them anywhere (not just at the retailer).

General-purpose or “flexible” rewards credit cards are not associated with a specific brand, you can use them anywhere the card network is accepted, and they still allow you to earn rewards on your purchases. Rewards earned on general-purpose credit cards aren't restricted to a specific retail or brand.

Key Takeaways

  • Private label cards, also known as store cards, are credit cards you use at a specific retailer.
  • You can use some private label cards to earn rewards and discounts.
  • If you make a purchase with promotional deferred interest, be sure to pay the entire balance before the promo period is over.
  • Co-branded credit cards and general rewards cards are good alternatives to private label cards.