More retailers are launching credit cards — but are they worth it?
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.
The latest brand with plans to launch a credit card may offer some insight into the future of the industry.
Walgreens — yes, that corner drugstore — will unveil a lineup of credit cards later this year in partnership with Mastercard and Synchrony Bank as it pushes to expand its core business.
On the surface, creating a credit card may seem like an odd choice for a brand known for its brick-and-mortar locations to pick up cold medicine and snacks. However, Walgreens is just the latest company to announce (or launch) a credit card in the past year in the midst of the pandemic. And it’s not as strange as it may seem.
As brands closer align with customer loyalty programs — and digitization accelerates — we’ll likely see this trend continue. Let’s take a closer look at why these cards are launching now — and if they are actually worth your while.
Want more credit card news and advice delivered straight to your inbox? Sign up for the daily TPG newsletter!
Why Walgreens (and others) are launching cards now
It boils down to this: Companies are trying to appeal to the modern consumer in a COVID-19 world.
Walgreens is a prime example of a company that is adapting to changing consumer behavior. In-person jaunts to pick up a prescription or browse for candy are being replaced by online purchases and digital pharmacies.
The pandemic has forced Walgreens — like many other brands — to accelerate its plans to reach customers in new ways. And that’s where the loyalty and credit cards angle comes into play.
Take this pivot for instance. Walgreens launched its myWalgreens loyalty program in November 2020 — and is shifting its business focus to wellness, health and well-being.
According to a statement from Walgreens President John Standley, that includes a “commitment to providing customers and patients with unparalleled loyalty and rewards experiences for managing their health and well-being.”
For the Walgreens credit card, that means consumers can expect accelerated rewards and bonuses in the health and wellness category, along with a mobile-first experience.
Last year, Verizon launched a card of its own, issued by Synchrony Bank. Beyond core products and services, cobranded cards can be serious moneymakers for brands. From merchant interchange fees to interest and late payments, this additional revenue stream can be a cash cow. And you can bet companies such as Verizon and Walgreens took notes from the world of airline and hotel cobranded cards.
In 2020 and at least for the first half of 2021, there remains a strong appetite for non-travel cash-back cards, particularly with bonus categories that align closer with how many people are spending currently.
We’ve seen a number of new non-travel rewards cards launch in recent years from retailers including Apple, Starbucks, Verizon, Walgreens, Venmo and more. But are these new retail-centric cards entering the market a good value for cardholders?
Are these cobranded retail cards worth applying for?
The short answer? Rarely.
The thing that many of these credit cards lack is flexibility — both in earning and redeeming. While cards such as the Chase Freedom Unlimited — one of the top cash-back credit cards on the market — offer solid earning opportunities across a wide range of categories and an easy redemption process that makes using rewards simple, many retailer cards make it harder to earn and burn rewards. That hinders their ability to compete.
Take the Verizon Visa Card, for example. On paper, the card offers great bonus categories: 4% on gas and groceries, 3% on dining, 2% on Verizon purchases and 1% on everything else. However, those rewards are earned via Verizon Dollars that can only be redeemed for Verizon purchases.
This means that retail cards like Verizon and Walgreens are really only valuable to a certain type of customer who can’t find that same value elsewhere. In this case, a Verizon customer with a monthly phone bill may find enough value in the card’s bonus categories to justify applying. But most of the time, other cards prove to be more valuable — even for Verizon customers.
Even the Venmo Credit Card, which does offer more in terms of flexibility than most of the brand-specific cards that have come out in the past year, still doesn’t quite measure up to a lot of the top cash-back credit cards. That’s because Venmo caps the annual spending limit at $10,000, which means you can only earn up to $300 cash back per year.
Those who use Venmo as a cornerstone of their daily shopping habits may find value in the card, but you can still find better bonus categories with other cards.
The information for the Verizon and Venmo cards has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
The argument for cobranded travel credit cards
Perhaps a more direct comparison are airline and hotel cobranded cards. Like retailer cards, they are marketed toward loyal customers of a specific brand rather than a broader audience. But cobranded travel cards have still mastered two important elements of the credit card game that these retail cards still lack — sign-up bonuses and perks.
While some cobranded credit cards may offer less flexibility than traditional rewards credit cards, they typically come with solid sign-up bonuses and/or brand-specific perks. The Delta SkyMiles® Gold American Express Card, for example, offers a $100 Delta flight credit after spending $10,000 in purchases in a calendar year, travel protections, a Pay with Miles discount and your first checked bag free.
Even the IHG Rewards Club Traveler Credit Card (a no-annual-fee cobranded hotel card) comes with a list of perks to help entice cardholders to keep it.
At the end of the day, it’s harder to justify keeping retail cards when they offer little in the way of sign-up bonuses, perks or flexibility. For most credit card shoppers, there are simply more valuable credit card options out there right now.
To be fair, we don’t yet have the exact details on the Walgreens credit card lineup to be launched later this year. But the overarching theme of these new retail credit cards the past year has remained the same — solid bonus categories on a surface level, but little in the way of sign-up bonuses, perks and/or flexibility.
While the credit card market might be an enticing industry for brands to explore as the brand loyalty game continues to evolve at a rapid pace, we’ve yet to see many of these retail brands offer a compelling card offer that can compete against top cards from banks such as Chase, American Express and Capital One.
Featured photo by filadendron/Getty Images.
Welcome to The Points Guy!
WELCOME OFFER: 80,000 Points
TPG'S BONUS VALUATION*: $1,650
CARD HIGHLIGHTS: 2X points on all travel and dining, points transferrable to over a dozen travel partners
*Bonus value is an estimated value calculated by TPG and not the card issuer. View our latest valuations here.
- Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,000 when you redeem through Chase Ultimate Rewards®. Plus earn up to $50 in statement credits towards grocery store purchases within your first year of account opening.
- Earn 2X points on dining including eligible delivery services, takeout and dining out and travel. Plus, earn 1 point per dollar spent on all other purchases.
- Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,000 toward travel.
- With Pay Yourself Back℠, your points are worth 25% more during the current offer when you redeem them for statement credits against existing purchases in select, rotating categories.
- Get unlimited deliveries with a $0 delivery fee and reduced service fees on eligible orders over $12 for a minimum of one year with DashPass, DoorDash's subscription service. Activate by 12/31/21.
- Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more.
- Get up to $60 back on an eligible Peloton Digital or All-Access Membership through 12/31/2021, and get full access to their workout library through the Peloton app, including cardio, running, strength, yoga, and more. Take classes using a phone, tablet, or TV. No fitness equipment is required.