Citigroup announced it has decided to keep its once-beleaguered retail credit card division. The bank noted an increase in consumers paying down debt and using credit cards more judiciously, making the co-branded and private label credit cards more lucrative for the company.

The company had in the past two years been trying to sell its retail card portfolio, citing the poor economy which resulted in fewer purchases and the large losses it took on those loans but did not find a successful buyer for the division. Based in New York, Citigroup counts among its retail partners such icons as Sears, Zales, Macy's, Bloomingdale's, numerous gasoline retailers such as Sunoco and Shell, and home improvement giant Home Depot.

Retail credit cards were a desired source of new revenue before the economic downturn, but because the cards are marketed to a larger segment of the public — including those who have lower credit scores — and the default rate climbed. These cards also generally have a much higher interest than standard credit cards.

Citigroup revealed during its announcement that the company had better-than-expected earnings for the third quarter, and also that its net charge-off rate for noncollectable loans had decreased to 7 percent from 12.24 percent a year ago.

Citi attributes the gains in its retail card division to its increased marketing efforts of those cards, and the fact it has been working with its retail partners to be more selective in the customers to whom those cards are offered. Citi said it's seen a 20 percent increase in the FICO credit scores of borrowers applying for its retail cards.

Other banks are turning back to retail credit cards, the Wall Street Journal reports. Capital One has purchased HSBC Holding and its portfolio that includes retail cards, and Capital One also acquired discount department store Kohl's store card from J.P. Morgan & Chase this year