Target shoppers who carry the store’s co-branded credit card will soon find themselves doing business with Toronto-Dominion Bank (TD Bank).
In a long-sought agreement signed this week, TD Bank agreed to be the exclusive issuer of Target branded credit cards and take on their entire credit card portfolio, which has an outstanding balance of $5.9 billion. The details of the agreement were not disclosed, but TD CEO Ed Clark issued a statement saying that it “aligns perfectly with our risk profile and strategy.” The bank’s adjusted profit target for 2013 is $1.6 billion.
Target has been trying to hand off its credit card portfolio for nearly two years – they put this debt on the market in January 2011. Until now, they were unable to find a buyer. Under this deal, which will play out over seven years, Target and TD Bank will share profits generated by the portfolio. Target will have a larger share and maintain responsibility for operations and customer service for the credit cards, while risk management and compliance will be handled by TD Bank.
Target REDcard Rewards worth High APR?
The Target-branded credit card, called the REDcard, offers customers rewards and discounts. The card comes in debit and credit versions and is a Visa card. Both the credit and debit card give Target shoppers five percent back on all Target purchases and free shipping from Target.com, but like most store-branded credit cards, it carries a high APR, around 25 percent.
Customers who want to use the Target credit card to get five percent off at Target would be wise to pay off their entire purchases in full, or the interest accrued will wipe out the rewards.
A Better Cash Back Option
Another way to get five percent back is to use a cash back credit card that offers five percent back in rotating categories, like the Discover More card or the Chase Freedom card. Both of these cards offer lower APRs, one percent cash back on purchases made anywhere, and five percent back in categories that change with the seasons.
From October 1st through December 31st, the Discover More card is offering five percent cash back at department stores, toy stores, and electronics stores, and during the same time period, Chase Freedom’s five percent back offer is good at Kohl’s, Best Buy, hotels and airlines. That means Chase lets customers save on holiday travel as well as clothing and electronics, while Discover card holders get the biggest payoff when shopping for gifts of all kinds.
Of course, Discover and Chase cards are accepted at Target as well – so savvy shoppers will be able to take advantage of sales, discounts, and credit card rewards by using their cash back cards at Target all year long.