Target Corp. has revamped its rewards program in an effort to steer more transactions to its private-label store cards.

Under the program announced Thursday, customers paying with Target-branded credit or prepaid cards will get a 5% discount at the point of sale on all purchases, starting this fall.

The new program is to replace the retailer's existing rewards program, in which Target cardholders earn points with each purchase and can earn 10% off on one day of shopping at the store.

Besides driving in-store sales, Target said, a goal of the new program is to reverse a decline of its credit card receivables.

"Our gross receivables have been declining for some time due to a variety of factors, including the economy and tighter underwriting standards," said a Target representative. "With this new rewards program, we expect to see a significant increase in card applications and more card usage."

Target said it will continue to support its cobranded Target Visa cards, which comprise 95% of its credit card portfolio. But observers said that the retailer's goal is to shift more customers to its private-label credit and debit cards. Target said in April that it would no longer offer the cobranded Visa cards.

"Through attrition and through this new type of rewards program, Target is likely to see more customers gravitating now to its private-label credit card," said Brian Riley, a research director at TowerGroup.

Target has offered private-label credit cards since 1995, and in 2001 it introduced the cobranded Visa card. Its private-label Target check card, offered for several years, deducts purchases through the automated clearing house system from cardholders' checking accounts.

Target is one of the first major retailers to offer on-the-spot rewards for paying with a credit or debit card, though the trend is gaining some steam in Europe, analysts say.

"This is a fairly innovative move," said Megan Bramlette, a managing associate at Auriemma Consulting Group. "Receivables are down for the entire industry, and with this move Target is doing something about it."

Target has struggled to determine a direction for its credit card portfolio in recent years. Its chargeoff rate has hovered at 15%, well above the industry average. Some shareholders in recent years clamored for Target to sell the portfolio, and in 2008 the company signed a $3.6 billion deal with JPMorgan Chase & Co. to fund 47% of its card portfolio.

Recently the card business has improved. In May, Target reported credit card portfolio profits in the first quarter of $111 million, up 185% from the year earlier.

Target tested the 5% discount rewards program beginning in October in Kansas City, Mo., and participating customers visited its stores more often, producing higher overall sales, the company said.

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