Private Label Credit Cards - How to Use Them?

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Banks and other financial institutions in the UAE have changed their credit cards to accommodate customer needs and enhance their overall customer experience. You can get a general-purpose credit card that can be used at various stores and outlets. However, individuals loyal to specific brands can use private label credit cards that are specifically designed for selected brands and stores. These cards offer exclusive discounts and privileges at selected merchants and help in building a customer base for the businesses.

Private label credit cards are a result of a partnership between the banks, merchants or businesses, where the bank funds the customer’s transactions and the business handles the marketing and credit card sales. Read the article below to know more about private label credit cards and ways to maximise your benefits using them.  

What is a Private Label Credit Card?

In addition to the services offered by general-purpose credit cards, a private label credit card provides exclusive benefits at selected merchants and brands. It helps businesses in establishing customer relationships and brand loyalty, eventually increasing sales and profits. In most cases, the private label cards do not hold logos of payment channels as in the case of a general credit card. Instead, they carry the brand name and logos of the merchants or businesses. 

The primary focus of a private label credit card is to make customers’ experience more convenient and facilitate easy shopping and purchases through exclusive discounts, return and exchange policies. Like a general-purpose credit card, these cards also include interest rates on outstanding balances and offer grace periods for repayments.

Private label cards may also be referred to as white label credit cards. Intended to be used at a specific store, a major chunk of its benefits can be harnessed at the issuing stores. However, these cards themselves can be used anywhere like a normal credit card. 

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How Does a Private Label Credit Card Work in UAE?

Private label credit cards work in collaboration with banks and a third party partner. The partners are also known as label credit card providers and assist in issuing, funding, and payment collection. Since the banks and financial institutions manage these credit cards, the cardholder receives the same level of safety and security as a normal credit card. 

A new credit card application is approved in the same way as in the case of a general-purpose credit card and the bank provides funds and handles their payments. On the other hand, the branding partner sponsors promote and market the products by attracting new customers. 

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Why do Companies Need to Issue Private Label Credit?

The profits through private label credit cards go hand in hand for the bank and the branding partner. Additionally, the retailers receive added advantage of low or zero processing fees on payments. For general credit cards, the brands and merchants have to rely on the bank’s payment system and, they often need to pay a processing fee of up to 4% per transaction. Thus, a private label card is a profitable choice for retailers and merchants and helps them earn more per transaction.  Following are a few reasons for companies to prefer private label credit cards. 

  • Consumer Transactions -  With a private label card, the companies offer promotional rates on purchasing their products. It increases sales and helps retain the customers. In the case of a general-purpose credit card, the consumers need to purchase against their credit limits and are required to pay an instalment every month as per the bank’s terms and conditions. 
  • Loyalty Programs - Private label cards offer extensive rewards, discounts and other incentives to credit cardholders. However, these rewards and incentives are only applicable at selected outlets and brands. Again, this helps the merchants retain customers through loyalty benefits. Despite being less flexible, the private label credit card compensates by offering extensive rewards and loyalty benefits. 

What are the Advantages of Private Label Credit Cards?

Private label cards provide numerous benefits enabling retailers to offer lenient terms like deferred payments to consumers. It not only helps the customers with a better shopping experience but also allows them to earn rewards points that they can redeem to avail themselves of additional discounts on future purchases. Following are a few advantages of private label credit cards in UAE. 

  • Special Perks and Benefits - Several private label credit cards offer their eligible customers an alternative to finance their expenses or provide them with lucrative perks and benefits for being loyal customers. These credit cards can be used at a variety of stores but offer benefits at a selected store that partner with the bank under a private label program. 
  • Helps build your Credit Profile - The banks and issuers that provide private label credit cards report your credit performance to the credit bureaus, similar to a general-purpose credit card. If you use your credit card responsibly, paying your outstanding balances on time, you can ensure a healthy credit performance and maintain your creditworthiness for future loans. 
  • Enjoy the Brand Benefits - A private label credit card comes with numerous benefits to the cardholder for being a loyal customer to a specific brand. With these cards, you can enjoy attractive discounts, special perks and privileges which are not available for a general credit card. Additionally, regular shoppers can accrue extensive rewards to further add to their card benefits. Thus, private label credit cards can help you save more if you understand how to use the card conservatively. 
  • Preferential Rates and Privileges - An individual qualifying for a private label credit card enjoys preferential rates which are lower than general-purpose credit cards when used at partnering stores. In addition, they may also receive rebates on card fees and charges for meeting the minimum expenses as per the terms and conditions of the partnering merchant and issuing banks. 

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How to Use a Private Label Credit Card to Maximise Your Benefits?

With the presence of a prominent brand’s logo on the credit card, the private label credit cards help leave a lasting impression and bond with the partnering company. The private label card program allows the brands to provide lenient criteria and conditions, eventually profiting both customers and the brands. However, you need to maintain a healthy financial practice to maximise your benefits through a private label credit card. Here are a few ways by which you can maximise your benefits. 

  • Before using the private label credit card, understand the terms and conditions of the card. By following the regulations of the partnering brand, you reduce the chances of penalties and enjoy the privileges. 
  • If you own a private label credit card, try using it only with the partnering brand. With this, you ensure better loyalty rewards and membership privileges. 
  • Always ensure to go through the annual membership charges, finance charges and other fees to check the affordability of the credit cards. 
  • If the private label credit card provides you with alternative financing options, ensure to go through the fine prints. 
  • You might receive tempting offers and discounts on your private label credit card but use your card responsibly and shop only when you need the product. Sometimes temping offers may provoke you useless purchasing consequently creating losses. 

How to Choose the Right Private Label Credit Card?

Although private label credit cards offer an attractive reward program and discounts, you need to cautiously choose a private label credit card. Since these cards offer benefits at specific brands, you should select your card based on your expenses at various stores. Consider the following points to choose the right private label credit card for yourself.

  • Track your Expenses Pattern - Before applying for a private label credit card, track your expenditure and see in what segment you spend the most. By doing so, you can find the right private label credit card that offers benefits in your spending segment. For example, if you are a frequent traveller, you should choose an airline partnering brand such as Emirates Skywards credit card that offers discounts and privileges on your travel bookings. Similarly, if a major chunk of expenses goes into groceries, you can opt for a supermarket brand credit card such as Lulu Platinum credit cards. 
  • Check the Credit Card Affordability - While the private label credit cards offer exclusive rewards, they may charge a higher membership fee, APRs (Annual Percentage Rates) and finance charges. When applying for such cards, go through the charges schedule and verify how affordable these cards are to you.
  • Go through the Credit Cards Terms and Conditions - Some private label credit cards may offer tempting deals but, may have terms and conditions to be fulfilled. To enjoy several offers on the card, you may need to meet the minimum expense criteria that may impact your budget. Before purchasing a private label credit card, go through all the terms and conditions for redeeming, reusing, and collecting the rewards and benefits. 
  • Verify Your Eligibility - Once you have collected a list of the best private label credit cards suiting your needs, you need to ensure your eligibility. Check for the income requirements, nationality, and age requirements. 

Pros and Cons of Private Label Credit Cards  

Following are the advantages and disadvantages of private label credit cards in UAE. 

Pros of Private Label Credit Card

  • Earn Loyalty Rewards: Private level credit cards offer rewards on each and every purchase. You can redeem these rewards to enjoy additional discounts and privileges on future purchases.
  • Lenient Eligibility: Since customer sign-up and retention are the main aims of partnering merchants, the eligibility criteria for private label credit cards are lenient in comparison to general credit cards. Some retailers offer these cards to individuals even with low credit scores. 

Cons of Private Label Credit Card

  • Greater APR: In most cases, a private label credit card has a greater APR in comparison to a general credit card.
  • Limited Usability: Although you can use private label cards like normal credit cards, there are certain limitations to using them beyond the partnering merchants.
  • Deferred Interest: Deferred interest may help you save more if you repay your purchase before the promotional period.  However, it can charge you a hefty amount if you fail to pay off your balances within the due date (Promotional period). size) if you can't pay off your balance by the deadline.

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Conclusion

Being a loyal customer of a specific brand in UAE can offer you additional savings with private label credit cards. You can apply for credit cards at banks or partnering merchants. Along with various benefits, you get exclusive discounts and promotional offers. However, you need to use your card responsibly to maximise your benefits. And, it is important to go through the terms and conditions of private label cards and plan card uses accordingly.