Retailers have been issuing private-label credit cards for decades, but not because they love financial products. They issue them because they work. Co-branded cards bring customers closer to the company, bring in ancillary revenue, and they offer a powerful pathway for long-lasting customer connection.
Cardholders spend significantly more
Private-label cardholders are among a retailer’s highest-value customers, representing the unique intersection of loyalists, customers who value rewards and benefits, and those interested in a financial product. Consider the facts:
- Eighty-seven percent of private-label cardholders use the card every time they shop at the issuing retailer. 🔗
- Two examples: Target store card users spend roughly five times more than other shoppers. Kohl’s loyalty members with the store card spend 6X more than non-member customers.
That kind of difference isn’t marginal. It’s transformational. It might be tempting to assume these customers are simply choosing an available payment method. That would be wrong. They’re paying differently and behaving differently. Cardholders are an exceptionally interesting customer cohort. Branded cards increase frequency and share of wallet, shifting purchasing patterns in three important ways:
They create purchase gravity
Consumers are drawn to brands — and often remain loyal — until a comparable option appears at a better price, or with more compelling rewards. Today’s shoppers rarely commit to just one retailer, most belong to multiple loyalty programs and actively compare offers across brands. Price plays a role, but rewards can be just as powerful. In fact, 42 percent of consumers say they use store-branded cards specifically for the rewards. When incentives are richer with one brand, spending naturally shifts in that direction. Offering additional ways to earn rewards cements card use, and adds a new dimension to top-of-wallet selection.
They increase trip frequency
Sixty-nine percent of consumers are likely to continue to purchase from the brand that issued their card. Incremental rewards, discounts, and earnings tiers can drive frequency, creating more reasons to visit.
They increase basket size
Stacked rewards encourage larger transactions. Store-branded cards typically increase customer spending by 25 percent. Coupled with more frequent visits, this adds up to significant revenue lift.
In short, the branded cards don’t just process a purchase. They influence where, how often, and how large that purchase is.
The one-two punch: Loyalty + payment is more powerful than loyalty alone
When loyalty lives in the payment instrument, it’s activated every time the customer reaches checkout. That’s fundamentally different from a passive points program. It’s an intuitive pathway for consumers to use the branded card for a purchase with that brand. They accrue accelerated rewards, and can get even closer to redemptions.
There’s a reason co-branded credit cards are popular. For consumers, these cards offer a faster path to loyalty incentives and rewards. Viewed less objectively, these cards also signal brand affinity and belonging. For businesses, cards bring new revenue from interchange, keep the brand top-of-mind with each use, and boost spending patterns.
But.
Adding co-branded debit cards
Credit has its limits. It can also serve as a barrier for those who don’t qualify, are credit averse, or simply prefer debit. Generationally, 52 percent of Gen Z prefer debit. Younger generations frequently rely on debit for daily transactions, with 69 percent of Gen Z using them weekly. 🔗 With more frequent use for everyday purchases (vs just those with the issuing brand), companies stay more relevant with the growing affluence of younger consumers.
It’s not a replacement for credit, it’s offering an attractive and viable path for more customers to engage with a brand. Some customers may opt for both credit and debit, giving them more choice in payments, while earning rewards for both card types.
The real facts on debit
Interchange earnings are lower for debit cards, so this revenue stream won’t be as robust. However, this can be offset by card fees. And, debit has one significant difference from credit: Consumers can hold funds in a debit card account. Cards holding stored value can earn interest on consumer funds until the moment they are spent. Case in point, the $1.6 billion (yes, billion) Starbucks earned last year on consumer funds yield.
A final consideration: Co-branded credit cards are issued by a bank, with the company’s log and brand on the card itself. However, all customer spending patterns and data belong to the bank. That missing link makes offers and rewards more difficult to personalize for each customer segment. And, as loyalty programs become more vanilla, companies that can cater to their specific customers will win with tailored promotions, rewards, and access. These are the keys to customer retention.
Think beyond interchange
Taking a page from travel & hospitality companies, leading retailers are signalling change by offering additional card types. The next evolution isn’t about replacing credit — it’s about expanding the branded payment ecosystem.
Credit + Debit widens the funnel, reduces approval friction, deepens loyalty, and creates more moments where the brand sits at the center of the transaction. Retail-branded cards have always driven sales. The brands that offer debit alongside credit will drive something even more valuable: Larger share of wallet.
