Few retailers offer credit cards directly, since complex credit accounts often require tougher security and liquidity requirements. A handful of banks and private equity groups specialize in the business of offering retail credit under retailers' names, but the major players face their own hurdles without the further challenge of absorbing new accounts.
Consumers in crisis tend to let retail credit cards fall into delinquency first, preferring to keep major branded credit cards current. Retail credit specialists compensate for these defaults with higher-than-average finance charges and with enhanced profit sharing from store partners. Despite investor pressure on Citi to divest its private label credit card services, the soft market may force the bank to maintain its accounts indefinitely.
About the Author
Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.