What Is a Proprietary Credit Card and How Does It Work?

A proprietary credit card is a financial tool tied to a single merchant or a specific group of affiliated retailers. It allows customers to make purchases exclusively within that brand’s ecosystem, differentiating it from cards accepted more broadly. This specialized payment option is offered directly by the retailer or a financial institution on their behalf, serving as a distinct component of their customer engagement strategy.

Understanding Proprietary Credit Cards

Proprietary credit cards, sometimes called private label cards or store cards, are issued by a retailer or a financial institution working directly with that retailer. These cards operate outside major payment networks like Visa, Mastercard, American Express, or Discover, limiting their acceptance. Their primary function is to foster customer loyalty and provide in-store financing options, encouraging repeat business and larger purchases within the issuing brand’s environment.

These cards come with their own distinct terms, conditions, interest rates, and reward structures, which are unique to the issuer. Annual Percentage Rates (APRs) on proprietary cards are often higher than those on general-purpose credit cards, with recent averages exceeding 30%. Credit limits can vary widely based on an applicant’s creditworthiness, but they may initially be lower than limits on general-purpose cards. Many proprietary cards offer promotional financing, such as deferred interest plans, which can result in significant interest charges if the balance is not paid in full by the promotional period’s end. Like other credit products, payment activity on these cards is typically reported to major credit bureaus, impacting a consumer’s credit score.

Where Proprietary Cards Can Be Used

These cards can generally only be used at the specific store, brand, or family of stores that issued them. For instance, a credit card issued by a particular department store would typically only be valid for purchases at that department store’s physical locations or its associated online platforms.

This restricted usage means proprietary cards cannot be used at competing retailers, for general online shopping outside the issuing brand’s website, or for cash advances at automated teller machines. The “closed-loop” nature of these cards reinforces their role as a store-specific loyalty and financing instrument.

Distinguishing from General-Purpose Credit Cards

Proprietary credit cards differ significantly from general-purpose credit cards, such as those bearing the Visa, Mastercard, American Express, or Discover logos. General-purpose cards are widely accepted globally, while proprietary cards are restricted to the issuing retailer or its affiliated brands. General-purpose cards are typically issued by financial institutions like banks and credit unions, while proprietary cards are issued by or on behalf of retailers.

Reward structures also vary; general-purpose cards offer broader rewards categories, such as cash back on everyday spending or travel points, redeemable across various merchants. In contrast, proprietary cards offer rewards, like discounts or store-specific points, that are usually redeemable only at the issuing store. Proprietary cards often carry higher standard Annual Percentage Rates (APRs) than general-purpose cards. While both types of cards report payment activity to credit bureaus, general-purpose cards generally offer more versatility for diverse financial needs.

Examples of Proprietary Credit Cards

Many well-known retailers offer proprietary credit cards to their customers. Department stores frequently provide their own branded credit cards, which typically offer immediate discounts on purchases made within the store or access to exclusive sales events.

Large retail brands, particularly those in home improvement or electronics, often issue proprietary cards that can only be used at their dedicated stores or websites. These cards commonly feature special financing promotions for larger purchases like appliances or furniture. Gas station chains also offer proprietary cards, which are restricted to use at their specific stations and often provide per-gallon discounts or loyalty points on fuel.