Day Six: More on Deciphering the World of Plastic

Adjust text size

Article Tools

print this article

add bookmark

digg this

reddit

save to del.icio.us

As you’ve read in our earlier installments, the world of credit cards is getting even more and more complicated.

To make the muddy waters still murkier, more and more retail stores are teaming up with American Express, MasterCard or Visa to issue credit cards that carry the name of the store and the logo of the card issuer. But they also still offer cards that can be used only in their own stores.

So how do you make a choice?

Private label cards are easier to qualify for, offer one high APR for all, with a low credit limit. They can be used only in one store, and offer rewards for shopping in that store.

But the one-store-only cards have begun introducing reward programs that pay cardholders to use their cards again and again. Retailers are getting creative in how they can reward customers for parting with their holiday cash, and get them to come back and spend more after the post-holiday sales.

The GapCard, accepted at Gap, Banana Republic, Old Navy and piperlime.com, offers 5 percent rewards on all purchases at any of those stores, free standard shipping on all online purchases over $100, and 10 percent off any purchase the first Tuesday of every month. Other incentives also come and go as the Gap companies work to keep their customers walking through the doors for more.

Joining private-label cards in the race for your money are co-branded cards.

Co-branded cards bear the names of a retailer, such as Gap, Target or eBay, and have a Visa or MasterCard logo planted in one corner.

Holders of Visa co-branded GapCards, for example, receive all the benefits of the Gap's private-label cards plus they get 1 percent back on all purchases anywhere Visa is accepted. EBay cardholders earn points on their MasterCard purchases that they can use to pay their membership and other fees on eBay.

For some retailers, the upside of having a large credit card issuer as a partner is being able to share the financial risks.

Other retailers, such as Target and Nordstrom, issue their own co-branded and private-label cards through their subsidiary banks.

There are generally some key differences between the two types of programs.

It's easier to qualify for a private-label card because of the control the store has and because the credit limits are typically much lower than on a co-branded card.

The credit underwriting standards for co-branded cards like the Target Visa card are different because the customer can use it in so many places.

Customers shopping for a co-branded card will generally look more closely at what rate they're getting than they would on a private label card, especially if their credit is good. They usually won’t take a rate that isn't good, unless the rewards are good enough.

Which card you choose ultimately depends on your shopping habits. If you compartmentalize your spending, you might want to keep your gas purchases on your gas card and your clothing purchases on a Dillard's card, for example.