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Consumers using more private label cards to increase credit scores
By Marvin Milner on Aug 21st, 2010
As Americans focus on repaying their debt, private label credit cards are seeing a boost in business as consumers open more for their shopping needs.
Confidence in the economy continues to drop, steering Americans away from credit despite the protection that will be provided by the Credit Card Accountability, Responsibility and Disclosure Act. Although retail cards are typically more risky, they are attracting a large amount of low-income families with poor credit scores as they attempt to restructure their finances.
The Wall Street Journal reports that private label cards often have higher interest rates and offer lower lines of credit, posing a greater chance of debt than general-purpose cards. However, many consumers are signing up for retail cards in hopes of not only increasing their credit scores, but adopting better spending habits as well.
"Issuers have flushed through a lot of the bad debt, and we see yields increasing," credit consulting firm owner Robert Hammer told the Journal. "It's a win-win for private-label card issuers."
Consumers struggling with credit card debt could consider consolidation to reduce their monthly payments. Combining debt and taking out a smaller loan can lower interest rates.
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