Lending Tree’s CompareCard.Com site reports on the increase of Private Label Credit Card (PLCC) applications during the winter holiday season.
- Nearly 3 in 10 American adults applied for a store credit card during the 2018 holiday season, according to a new report from CompareCards.com, and millennials led the way.
- We found that many Americans just couldn’t resist the lure of a new store credit card.
- That’s despite the fact that these cards come with an average APR of about 25% — far higher than other credit cards – less lucrative rewards than general-purpose credit cards and fine print that can turn a good deal into a not-so-great one.
PLCC typically have better approval rates than credit cards; since there is a closed loop between the cardholder, the issuer and the retailer, control is native to the card. You can shop in one particular store, but do not have the universal access of an American Express, Discover, Mastercard or Visa.
The survey indicates well intended buyers, who expect off the balance in a month. According the the graphic,
- 49% expect to pay out in one month or less
- 19% expect to take 2 or 3 months to pay out
And, while 68% of those optimistic buyers expect to be paid in full in less than 90 days, 32% expect to carry balances.
What I found most interesting in the study is the range of applicants with age-segment cuts; we recap below in the form of [segment/% applied/% declined]. Rejection numbers seem a bit low but the trending makes sense.
- Silent Generation/10%/0% (means all approved)
- Baby Boomers/14%/5%
- Generation X/30%/11%
- Older Millennials/34%/9%
- Younger Millennials/43%/16%
- Generation Z/38%/8%
General purpose credit card issuers need to watch this market; the takeaway is low sensitivity to interest rates, which often hover at 25% and a high interest in credit card rewards. (Here we go again!)
The full survey, done by an independent firm, can be found here. Mercator Advisory clients can find our most recent report on PLCC here.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group