What to Watch for in the Private Label Credit Card Space

As economic headwinds shift and consumer behavior evolves, private label credit card (PLCC) issuers are entering a dynamic environment—one that demands a closer look at emerging risks and strategic responses.

What’s on the horizon for private label: Federal Reserve policy, inflationary pressures, and employment trends that will influence originations, credit performance, shopping habits, and overall portfolio health. As lenders assess credit risk and refine strategies for managing customer lifecycles, they must also contend with the growing presence of Buy Now, Pay Later (BNPL) financing and shifting consumer shopping and payment behaviors.

Consumer Sentiment and Economic Trends

The current wave of tariffs has unsettled global financial markets, and the impact on consumer confidence and inflation is still dynamic. Federal Reserve Chair Jerome Powell has publicly stated that the tariffs will result in higher inflation and slower economic growth, signaling that the Fed will not reduce interest rates in the near-term.

In response to higher prices, consumers may begin tightening their belts by reducing discretionary spend and avoiding opening new lines of credit. And although the March jobs report was extremely positive, with an increase of 228,000 jobs, it does not yet reflect a post-tariffs marketplace. Additionally, the unemployment rate crept upward from 4.1% in February 2025 to 4.2% in March 2025.

Consumers’ credit scores have been stable for the past several years, despite economic uncertainty. If unemployment notably increases, and/or aggravated inflation leads to payment compression, this could change. It is also important to note that present and future credit scores may not be directly comparable to their pre-pandemic norms due to shifts in bankruptcy trends, student loan resumption, medical debt reporting, the rise of Debt Settlement Companies (DSCs), and the expansion of Buy Now, Pay Later (BNPL) financing.

Portfolio Performance and Forecasting

Assessing credit portfolio health is essential for forecasting risks and opportunities. A shift in customer creditworthiness could indicate either emerging risks or signs of economic recovery. A slight but measurable increase in individual bankruptcy filings could suggest future volatility, while the prominence of debt settlement companies complicates forecasting as settlements are increasingly conducted in recovery rather than pre-charge off. Additionally, changes in payment behaviors, such as transactor versus revolver trends, will shape portfolio strategy.

Upcoming regulatory actions could also alter the PLCC landscape. The Hawley-Sanders bill aims to cap credit card interest rates at 10%, a move that could dramatically reshape the industry’s profitability models. Any future changes in interchange fee structures could also impact profitability and require issuers to evaluate their pricing and rewards strategies.

Managing Customer Lifecycle

As a best practice, lenders must balance promotional offerings with risk management strategies. Deferred interest remains a key selling point for PLCC programs, particularly in industries with higher average ticket sizes, such as home-related purchases. This balancing act is especially important when managing credit strategies for both new and existing customers, ensuring that promotional offerings attract new borrowers while maintaining sustainable risk levels for long-term account holders.

“Many lenders see credit lines at historic highs and are focusing on reducing limits for high-risk accounts,” Auriemma Roundtables Director Sheldon Stewart said. “While inactivity often triggers these decreases, industries like jewelry and electronics naturally have less frequent usage, requiring a more thoughtful approach. At the same time, strategic credit line increases remain key for strong-performing accounts, but lenders must carefully balance their frequency to manage risk effectively.”

Another notable trend, Stewart reports, is a “squeeze in the middle,” where consumers who previously paid more than the minimum are now only making minimum payments.

Many financial institutions are re-evaluating credit-tightening measures implemented in previous years to determine the balance between growth and risk. Some lenders who have seen initial improvements in portfolio performance in Q1 2025 may evaluate current credit strategy in the latter half of 2025 if positive trends continue. Others remain focused on navigating customers’ increasing debt load.

Emerging BNPL Competition

Buy Now, Pay Later (BNPL) offerings are increasingly competing with Private Label Credit Cards (PLCCs) by offering instant approval, interest-free installments, and broader merchant acceptance. Unlike PLCCs, which require credit checks and are tied to specific retailers, BNPL provides flexibility and appeals to a wider variety of shoppers, including affluent customers. As BNPL gains traction, many retailers are integrating it as part of the check-out flow, competing with the traditional store-branded credit card model. While PLCCs still hold value through brand loyalty programs, they must evolve to remain competitive against the growing convenience and accessibility of BNPL.

The Value of Collaboration

As the private label credit card space navigates through these challenging economic and regulatory shifts, the need for strategic insight and foresight has never been greater. Membership in Auriemma Roundtables’ Private Label Credit Risk group provides PLCC issuers with opportunities to dive deep into these trends, connect with peers, and gain actionable insights to refine credit risk strategies. Auriemma Roundtables’ Private Label Credit Risk Roundtable will be among the groups participating in Auriemma Roundtables’ Credit Risk Summit in June 2025. For information on attending, contact Tami Corsi.