Lowe’s Introduces 5% Discounts For Its Private-Label Credit Card

Lowe’s Cos. on April 22 introduced a discount program that enables customers paying with a Lowe’s private-label credit card to receive 5% off all Lowe’s purchases.

One analyst believes the move could be a bid to boost sagging cardholder receivables.

The discount is good for Lowe’s purchases made in the store or online, according to the home-improvement center operator, which is backing the program with a national television commercial. Customers with single-receipt purchases of $299 or more may opt to receive either the 5% discount or any other special financing the company is advertising.

General Electric Co.’s GE Money Bank issues the Lowe’s private-label credit cards.

Card issuers’ receivables as a whole last year declined by about 20% compared with the previous year, according to Fitch Ratings Inc.

And some card issuers’ total accounts declined by as much as 25% during the recession as they cut credit lines and closed consumers’ accounts to offset risk while defaults soared, Brian Riley, senior research director at TowerGroup, tells PaymentsSource.

“Most private-label card issuers, including GE, had a big slowdown during the recession, and now they are trying to revitalize things,” Riley says. “In the Lowe’s case, giving a 5% discount might generate more interest in borrowing on a private-label card at a time when things are beginning to pick up a bit.”

Whether other retailers will follow suit remains to be seen, Riley says.

Target Corp. in October introduced a 5% point-of-sale discount on purchases made with Target-branded cards, a move the company said resulted in a fourth-quarter surge of new-account activations and same-store sales growth (see story).

But such a strategy is unlikely to appeal to many retailers, Riley says.

“I doubt that a lot of stores will go this route because while an instant discount for paying with a private-label card might spark some sales activity, it also sucks revenue out of the bottom line and requires careful balancing for the retailer,” he notes.

What do you think about this? Send us your feedback. Click Here.