Fewer than half of all cardholders have a private-label credit card, but those who do are more likely to carry a balance routinely on various cards than consumers who rely only on general-purpose cards, new data from Auriemma Consulting Group suggests.

Holders of private-label cards tend to charge less per month on those cards than those with general-purpose cards, but those who carry multiple cards and revolve their balances are not likely to change either of these behaviors, Auriemma said in its monthly Cardbeat report.

Subsequently, private-label cardholders generally are "a profitable population for card issuers to target for acquisition and cross-sell offers," Auriemma said in the report.

Private-label card programs often have looser underwriting requirements than those of general-purpose credit cards because of their connection to stores' individual promotional strategies, Scott Strumello, an Auriemma associate, noted in an interview with PaymentsSource. As a result, they tend to be riskier and prone to higher losses, he said.

The average chargeoff rate on U.S. private-label credit cards at the end of June was 9.45%, 312 basis points higher than the 6.33% rate for general-purpose credit cards, according to Fitch Ratings Inc.

Auriemma conducted its online survey of 402 U.S. credit-card holders during the month of July.

Credit-card holders as a whole tend to allocate 48% of their annual card spending on credit cards, debit cards (32%), private-label cards (14%) and general-purpose charge cards (6%) that require payment in full each month, the survey data show.

Slightly less than half, or 47%, of all credit-card holders carry a private-label credit card, the survey found.

The private-label cards held most often are from Kohl's Corp. (20%); J.C. Penney Co. Inc. (18%); Macy's Inc. (18%); Sears Holdings Corp. (14%); Best Buy Co. Inc. (10%); The Home Depot Inc. (9%); and Wal-Mart Stores Inc. (7%).

Respondents spent $527 monthly on general-purpose credit cards compared with $106 on private-label cards. They carried an average balance of $1,486 on their most commonly used general-purpose credit card compared with $549 on their most frequently used private-label card.

It is not surprising that the average outstanding balances are lower on private-label cards, because private-label cards typically sport lower credit limits, Auriemma noted.

General-purpose credit cards offer an average credit limit of $7,094 compared with $2,995 for private-label cards, Auriemma's data shows. Some 60% of credit-card holders who revolved a balance on general-purpose credit cards also revolved a balance on private-label cards.

"We found that once cardholders begin revolving, it is typical they will carry balances often on more than one card as a way of life," Auriemma said in its report.

Some 49% of respondents said that in the previous one to four years they had never paid off a credit card balance of either type.

Store sales and merchandise discounts are the leading incentive to use private-label cards, respondents said. Some 38% of private-label cardholders cited a percentage discount on all items in a store as their primary motive for using a private-label card, while 34% cited a store card rewards program and another 34% said a special promotion caused them to use a private-label card.

Some 24% said their fondness for a particular retailer's merchandise was their primary motive for using a private-label card, and 13% cited special financing available with a private-label card.

The majority of private-label card accounts are opened at the point of sale, according to survey data.

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