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Why Brands Are Launching Their Own Credit Cards?

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The highly competitive world of retail means businesses must find ways to create customer loyalty. Launching a credit card gives a brand the ability to pass out member points for purchases all over, offer higher perks for shopping in the establishment, and keep the business’s name at the forefront of consumers’ minds.

Is it worth the time and effort involved in launching a card? As digitization accelerates beyond what anyone expected, finding ways to appeal to modern consumers can keep small brands from being overshadowed by online retailers.

According to McKinsey, the COVID-19 crisis accelerated digitally enabled products by seven years. Companies responded and acted 20 to 25 times faster than they thought possible to adapt to the rapid changes. That means competitors may already have systems in place to attract the target audience.

Why Do Retailers Set Up Their Own Credit Cards for Their Stores?

Credit can be profitable to the store, offering an additional percentage on purchases when the consumer spreads the payments out over several months. Why should an outside party get 2.6% or more, when the store can grab those profits instead?

Businesses can also offer bonuses and set up loyalty programs through a card. A discount on the first purchase is an attractive offer for most people. It might also help them go ahead with the impulse purchase they otherwise would wait on.

Retail business owners know a customer who says they’ll think about it and return will likely forget the store and products the second they leave. “Out of sight, out of mind” applies when it comes to brick-and-mortar stores.

People just out of school may want to build their credit, but may not yet qualify for big-brand cards. Smaller store credit cards traditionally are easier to qualify for. There is around $1.47 trillion in student loan debt in the United States. Millennials and Gen-Z may feel more comfortable starting with a small-credit-line card to their favorite retailer before getting more lines of credit. Use a card to grab these consumers and make them loyal to the brand before they go elsewhere.

Tips to Launch a Credit Card

Don’t worry about the costs involved in launching a credit card. Businesses can partner with major credit card companies, such as MasterCard and Visa, for a branded card. Co-branded cards add the backing of a major corporation to the card but give the retailer the benefit of adding loyalty programs and perks.

Pay close attention to all the terms and conditions of the partnership. Choose a respected company both the brand and its users can embrace. Read all the fine print to keep from getting tied into a difficult situation.

Learn From These Examples of Brand Credit Cards

1. CAT Card

The new CAT card is an excellent example of offering benefits to customers. Buying parts, renting equipment, and getting big machines serviced add up. Businesses sometimes suffer from cash flow issues, and a credit card with net-30 terms or the ability to spread payments out can help smaller builders and excavators get through the lean times. An added perk is the rewards users receive for using the card.

The card matches the brand’s color palette with a black background and a gold accent. It has distinctive look customers will instantly recognize.

2. Instacart

For brands selling essential and consumable products, a credit card is a no-brainer. Customers can set up orders on autopilot and even earn cash back toward future purchases. Part of the changes of COVID-19 is more and more people ordering their groceries online and picking them up curbside or having them delivered.

The Wall Street Journal reports the cards will arrive in the next year and offer 5% cash back on Instacart purchases. There are rumors DoorDash will offer a similar deal with discounts to area eateries.

3. General Motors

General Motors partnered with Goldman Sachs to come up with a co-branded rewards card program. The idea behind their branded program is to earn points for future purchases. Their customers can manage their borrowing needs while collecting discounts on something they’d buy anyway.

4. Walgreens

When one thinks of a branded credit card, a local drug store might not be their first thought. However, a credit card pairs perfectly with the customer loyalty program Walgreens already has in place.

The myWalgreens credit card boasts the MasterCard logo. Patrons earn $25 in Walgreens cash just for signing up. After that, customers earn 10% cash rewards on branded purchases and 5% on other things bought in the store. They can also earn rewards for getting healthy.

5. Verizon

Verizon timed up with Synchrony Bank to offer their first consumer credit card. Entering the financial sphere helps the company diversify its holdings but also offers perks to users. The product has no annual fee and 4% back on gas and groceries.

The cash back goes toward Verizon products and services, such as toward a phone bill or purchasing new devices. Recently, Verizon announced they would partner and allow cardholders to redeem rewards toward flights, hotels, car rentals, and some gift cards.

6. Cato Fashions

Shoppers at the retail clothing store will appreciate the ability to get a Cato credit card and start earning perks. Benefits include no annual fee and no interest if users pay the balance by the next billing date. The card is issued through Cedar Hill National Bank. Allowing people to shop with a store credit card means they may purchase their entire season’s wardrobe while there.

7. Fingerhut

Although more of a store credit account, Fingerhut is an excellent example of how a mail-order company uses credit to encourage customers to buy presents and larger items through their service.

For those just building credit, Fingerhut may be a good option, as they have a 90% approval rate upon verification. Customers can apply through their site and get a decision within minutes. They offer low monthly payments and a chance to build a credit history.

For those with poor credit or no credit history, Fingerhut is a good option. After three on-time payments, they often increase the credit limit. They also report on-time payments to the credit bureaus, which can help improve credit scores quickly.

8. West Elm

West Elm’s store card taps into their Key Rewards program and works with an array of their stores, including Pottery Barn, Williams Sonoma, West Elm, and Mark & Graham. Card members get 5% back any time they shop across their seven brands. Alternatively, customers can choose a 12-month financing option.

Be the first to hear about new releases and special promotional offers. By offering perks, such as an exclusive newsletter, they encourage their customers to shop within their brands instead of picking and choosing.

9. Amazon Prime Rewards Visa

E-commerce store owners should pay careful attention to Amazon Prime’s credit card rewards program. The brand offers 5% cash back on brand purchases, 2% at restaurants, gas stations, and drug stores, and 1% back on all other purchases. There are no annual fees and cardholders can use it anywhere Visa or MasterCard is accepted.

Those who already have a Prime membership may find the card a good option. However, if one has to pay the annual Prime fee, it isn’t a good value with other options out there.

Amazon offers incentives to sign up for a card, such as an account credit or discount. The offer varies, but can save users a big chunk of money on large purchases. While the promotions cost Amazon upfront, the users then continue with the card, earning Amazon additional fees and interest charges over time. This type of credit card offer is more of a long-term financial investment, where the business owner expects the card to pay off later.

10. Lowe’s Advantage Card

Lowe’s offers a credit card that helps people make big purchases toward home improvements. Some of the perks of their card include no annual fee, 5% off all eligible Lowe’s purchases, or promotional financing (varies). The card can only be used at Lowe’s and will accrue deferred interest if the borrower doesn’t pay the balance off at the end of the promotional period.

They frequently offer perks such as 20% off up to $100 on the first purchase after opening the account. The special promotional period is frequently six months. They may offer special financing payments or long promotional periods for purchases such as appliances or heating and cooling.

[Related: How many Credit Cards should I have?]

Launching a Branded Credit Card

The advantages of launching a credit card for a business far outweigh the learning curve. With so many large credit card companies offering co-branding opportunities, there really isn’t any reason businesses shouldn’t tap into the power of offering rewards and setting up card loyalty programs.

Customers will likely spend more once they have access to a line of credit. The store will help younger customers build a credit history. Brands such as Kohl’s create loyal customers by giving them their first credit card and helping them get started.

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Author at Due
Devin Partida grew up in the San Francisco Bay Area, where the booming tech and startup scene nurtured her curiosity. Always an avid writer in her younger years, Devin began covering the tech industry for ReHack in 2019, and has since become the young brand’s Editor-in-Chief. When she isn’t writing, Devin enjoys biking around the Golden Gate Bridge, eating hand-crafted ice creams and listening to true crime podcasts.

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