In 2023, store credit cards could significantly surge based on last year’s trends. A report by LendingTree revealed that 35% of Americans were likely to apply for a store credit card during the 2022 holiday season, the second-highest percentage in five years of tracking and up from 29% the year before. Additionally, TransUnion reported that store credit card originations reached 12.1 million in Q3 2022, up 8.4% compared to the previous year. Store credit card balances grew by 7.3%, indicating a growing interest in and usage of store credit cards.
Before recent growth, a significant portion of U.S. consumers already owned store credit cards, with nearly 28% having at least one and an average of two cards per owner, according to a March 2022 PYMNTS study. There are barriers to wider adoption, however, including low customer satisfaction — 37% of Americans who signed up for a store card later regretting it — and higher annual percentage rates (APRs) than general-purpose cards. Nonetheless, merchants should see the potential of store cards and view the issues as problems worth solving.
The “Credit Card Tracker®” explores how the increased usage of store cards could benefit merchants and consumers alike.
The Federal Reserve recently published its Quarterly Report on Household Debt and Credit, and the findings are mixed at best. During Q4 2022, credit card balances increased to $986 billion, higher than the pre-pandemic record, and credit card delinquencies nudged up slightly. Growth in mortgage and auto loan balances, however, was fairly modest and consistent with pre-pandemic levels.
Retail executives are cautioning that sales growth may be smaller than usual this year due to economic headwinds. Best Buy, for example, expects sales to drop by 3% to 6% in the coming year, while Kohl’s and Macy’s expect net sales to dip by 2% to 4%. Retailers catering to low-income shoppers also anticipate a disappointing 2023, with Dollar Tree and Big Lots among the companies predicting some underperformance.
For more on these and other stories, visit the Tracker’s News and Trends section.
According to a PYMNTS survey, consumers elect to use store cards for many reasons. Consumers’ top reason for using their store cards on eligible purchases was receiving rewards, cited by 42% of respondents. For comparison, just 22% of respondents cited rewards as a reason for using other payment methods, indicating that store cards tend to offer better rewards than other payment types.
Learn more in the Chart of the Month.
Despite the challenges to their widespread adoption, white-label store cards present a great opportunity for merchants. 
Those interested in using co-branded cards have two options: private-label cards, which can be used only at specific retailers, and co-branded cards, which cardholders can use at multiple merchants on the same network. In either case, co-branded cards can benefit merchants and their customers.
Store cards offer benefits to customers, such as increased approval rates for those with lower credit scores, easier payment tracking, and faster, more convenient payments. Store cards also provide exclusive rewards, discounts and perks, with 42% of consumers using them for this reason. The appeal of rewards may also be growing stronger, with 30% of co-branded credit card holders finding them more valuable now than before the pandemic. Consumers with store cards also use them 87% of the time when they can, according to PYMNTS data. These dynamics, in turn, benefit retailers by adding revenue and driving engagement.
To learn more about the benefits of white-label store cards and how they boost revenue and customer satisfaction, read the Tracker’s PYMNTS Intelligence.
The “Credit Card Tracker®,” a collaboration with Discover® Global Network, examines how white-label credit cards can help merchants drive revenue and improve customer satisfaction.