Target Privatizes Its Credit Cards

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May 4, 2010

The country’s second-largest discount chain no longer is issuing co-branded Visa credit cards, and is instead offering new qualified credit-card applicants its private-label Target credit card accepted only at Target stores and Target.com.

The company said this move is designed to generate greater retail sales, strengthen customer loyalty and rewards, and reduce its credit card operating costs.

Existing co-branded Visa credit-card customers, which represent 95 percent of the company’s outstanding loan balance, won’t feel any changes, according to Target, and can continue using their card wherever Visa cards are accepted. Once their cards expire, customers will receive Visa-branded cards.

Target began testing its private label credit cards last October and found that those guests visited the store more frequently and spent more than customers who use the co-branded Target Visa cards, according to a SmartMoney report.

“Adding more private-label cards to the company’s portfolio, which now stands at $7.6 billion, will shrink the amount it must pay out to other vendors,” John Ulzheimer, president for educational services at Credit.com told smart Money.

“When dealing with a retailer you always have to consider the revenue generated by the in-store and web-based sales,” he added. “There is significant margin that Target and other retailers do not realize when available credit is used to purchase goods and services from other establishments.”

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