Store Cards Turning Into A Nightmare For Retailers

Our eyes shoot fire when stores make their poor employees harass us about opening a store card, so we’re feeling a perverse sense of joy at the news that store cards are turning into a nightmare for retailers.

Sadly, it does seem that a growing pattern of defaults within the store card market may be indicative of a larger more troubling trend.

From the NYT:

The cards, known in the industry as private label credit cards, tend to be held by riskier borrowers with fewer credit options. Losses on the cards are rising at a faster pace than the broader credit card market – reaching a three-year high of 10.51 percent in January, according to Fitch Ratings, up 44 percent from a year ago. That compares with general credit card losses of 7.5 percent, up 40 percent from the year before.

While private label cards account for only about 11 percent of all credit card loans outstanding, their troubles offer a window into the deteriorating finances of some of the most distressed Americans. And the losses may prove to be a warning of deeper problems ahead for general cards as the economy weakens and unemployment climbs.

G.E., the largest provider of private label cards, is looking to quit the business altogether. G.E.’s operation provides cards for such giants as Walmart and Lowe’s, but was unsuccessful when it attempted to sell the division in 2007.

Losses Mount on Credit Cards for Retailers [NYT]
(Photo:Da Nes)