branded credit cards – private label credit cards

Branded credit cards are issued by banks.

HOW BANKS BENEFIT FROM BRANDED CREDIT CARDS
– make money from consumer interest, annual fees, late fees, and other fees
– high interest rates of 21% and up, average annual fee $50 per customer per year, and $30 per late fee is common
– charge the Branding company a % per sale, 10-80 basis points. This amount is in addition to Interchange, the fees paid to Visa & MasterCard Associations.
– insertion of marketing materials/statement stuffers from other parties which they may benefit by receiving a fee for inserting the piece or on a shared sale basis

HOW MERCHANTS BENEFIT
– When tied to loyalty programs, if the owner has a strong affinity for the card, they are very loyal to using the card continuing the whole ‘loving it’ customer/merchant relationship

PITFALLS OF PRIVATE LABEL
– Customer care is the number one issue with private label. The credit card owner identifies all their good and bad experiences with the branded company. However, they have no control over their customers experience with the servicing company.

Reality? I made a promotional purchase with a branded card at a well known chain store. Due to my own silly mistake, I was remiss in paying $5 due for 2 months in a row. Then I got the punchline. $78 in late fees due plus interest at 28% accrued on the total promotional purchase. I never worried about the high rate before because I always paid before it was due. There was ZERO negotiation with the issuing company. Communication was difficult because every time I called I was put on hold, and then finally put through to a foreign- ‘you-fill-in-the-country’ speaking person whose English was barely understandable. How do you think I feel about that company now?