Before COVID-19 forced nonessential retailers to close, consumers faced a familiar interaction at the checkout counter: the store credit card pitch.
But with temporary store closures during the spring and ongoing worries about keeping nonessential storefronts open, store employees can’t pitch as many consumers these store cards in person. So what does the ongoing pandemic mean for store credit cards? Research suggests that consumers may be more interested in them, but financial institutions aren’t extending credit to as many borrowers.
According to a recent report from CompareCards by LendingTree, 44% of Americans say they’re somewhat likely to apply for a store card during the holiday shopping season, an increase from 32% in 2019 and 24% in 2018. Per the report, Gen X consumers were most likely to apply for retail cards (78%), but other notable groups seeking these cards were parents of children under 18 (72%), workers who’ve been laid off or furloughed during the pandemic (64%) and men (63%).
Though consumers might be interested in getting more cards, financial institutions are originating fewer private label cards, according to an Equifax report published Oct. 20 shared with Retail Dive. As of the week ending on Oct. 11, 177,800 private label accounts were originated, down from 643,500 during the same week in 2019, according to the report. Financial firms have also cut credit limits from private label cards from more than $1.4 billion to $385.8 million.
Despite the pandemic-induced recession and uncertainty surrounding a second federal stimulus bill, store cards remain another channel for customer engagement, experts told Retail Dive. In response to the crisis, retailers have made online credit applications more accessible, improved their incentives and lowered interest rates to attract applicants and ultimately drive sales. But banks shouldering the risks for these cards are less inclined to approve as many applicants as they had in the past.