Consumers lean toward private labels to improve credit scores

As Americans focus on paying off their existing debt, they have shown a preference in private labels for their credit card needs. Many still do not trust major labels as the economy struggles to recover, although experts consider retail credit cards to be riskier. They typically come with higher interest rates and lower lines of credit, posing a greater threat for debt later down the road.

The Wall Street Journal reports that balances on store cards totaled $94 billion in 2009, down 8 percent from a year ago. Consumers are not only using private labels to rebuild their credit, but adopt better spending habits as well.

“Issuers have flushed through a lot of the bad debt, and we see yields increasing,” credit card consulting firm owner Robert Hammer told the Journal. “It’s a win-win for private-label card issuers.”

Consumers looking to sign up for either private label or general-purpose credit cards should read all terms and conditions prior to applying. By ensuring that they have the financial means to repay debt, consumers can prevent credit score damage in the future.