Target Credit Card Users Soon to Be TD Bank Customers
Major retailer and grocer, Target, announced that it would sell its credit card portfolio to TD Bank. As part of the agreement, Target customers would retain their right to a 5% discount when using the company’s card at the company’s stores, however, the financing would be provided by TD Bank, not by Target Corp.
The two companies agreed to a seven-year partnership that would allow for TD Bank to underwrite, fund, and own all the future cash flows from Target cards. Under terms of the deal, TD Bank will acquire the existing portfolio from Target Corp.
The move could be a boon for users of store cards. In the past year, several major credit card companies have taken a stake in rewards and store credit cards issued by independent retailers. Capital One signed a deal with clothing and department store chain Kohl’s to service and finance the company’s cards.
Deals like these generally work out favorably for customers. The programs are usually left unchanged while the banks that back the cards typically increase customer credit lines in anticipation of heavier promotion and consumer spending. Retailers, which do not traditionally hold a large part of their balance sheet in receivables from customers, can work to expand services in their core business of retailing goods to customers.
Store credit cards are among a single bright spot in the credit card market. Consumer balances on store credit cards rose to a 33 month high while consumers held store credit cards with open limits equal to more than $300 billion. New card originations were 15% higher than the year ago period, signaling that banks are becoming aggressive in opening new store cards for their new partners.
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