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What is a private label credit card?

Today, many retailers aren’t content just to sell merchandise, but are inviting customers to sign up for store cards, otherwise known as private label credit cards. Explore private label credit cards in greater depth with our simple guide. First off, what is a private label credit card?

Understanding private label credit cards

Private label credit cards (sometimes referred to as “white label credit cards”) are store-brand cards that are intended to be used exclusively at a specific retailer. Managed by banks or commercial finance companies, private label credit cards don’t have standard credit card logos (i.e. Visa, Mastercard) and in most cases, they cannot be used any other store than the brand where they were issued.

In some cases, private credit cards may be described as “co-branded.” This means that the core benefits of the card can only be exploited at the issuing store, but the card itself can be used anywhere, like a normal credit or debit card. In the case of co-branded private label credit cards, the issuing bank/payment processor will be clearly marked on the face of the card.

While private label credit cards are much more prevalent in the US than they are in the UK (according to recent research, the value of America’s private label credit card purchases hit $210 billion in 2018), they are a factor in the UK credit card landscape. For example, there are many different store cards or retail branded credit cards that customers can take advantage of in the UK market.

How does private label credit card processing work?

Private label credit cards are run in collaboration with banks or third-party financial institutions. The third-party partner (or private label credit card provider) assists in several areas, including issuing, funding, and payment collection. Because private credit cards are managed by banks or financial institutions, they offer exactly the same level of security and transparency as standard-issue credit or debit cards.

What are the benefits of a private credit card?

There are numerous benefits associated with private label credit cards. Most importantly, they allow retailers to offer more lenient terms (such as deferred payment) to customers than would otherwise be possible. This can help to encourage customers to spend more money at your store. In addition, private credit cards may give your customers the opportunity to earn loyalty points which can be used to gain discounts on future purchases, thereby increasing customer retention. In many cases, private label credit cards also offer VIP features, such as the ability to make returns without presenting a receipt.

Private label credit cards for small businesses

Private label credit cards can be a great way to boost customer loyalty and encourage customers to buy from your store. If you’re thinking about starting a private label credit card for your own retail business, there are a couple of things that you should consider before you get the ball rolling:

  • Compliance – There are a broad range of rules and regulations that you’ll need to abide by before you’re able to offer private credit cards. Think about your security processes, as well as whether your accounting team is ready to handle the extra work.

  • Branding – Many businesses switch up their branding as they grow, particularly when they’re still in the early stages. It’s important for the design of your private label credit card for small business to last, so bear this in mind if you’re considering a rebrand in the near future.

  • Support – If something goes wrong, your customers are more likely to contact you, rather than the issuing bank, so you’ll need to have a team in place to assist with the increased volume of enquiries.

Ultimately, you may find it easier and more effective to offer loyalty or reward cards. They aren’t so formal or exclusive as private label credit cards, but they can be a strong motivating factor to bring customers into your store. Plus, there’s no need to partner with a bank – you can make them entirely by yourself with a printer and a graphic design software package.

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GoCardless (company registration number 07495895) is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017, registration number 597190, for the provision of payment services. GoCardless SAS (23-25 Avenue Mac-Mahon, Paris, 75017, France), an affiliate of GoCardless Ltd (company registration number 834 422 180, R.C.S. PARIS), is authorised by the ACPR (French Prudential Supervision and Resolution Authority), Bank Code (CIB) 17118, for the provision of payment services.