How does Kohl's make money on its credit cards?


Quick Answer

Kohl’s currently makes money off of its store credit cards through interest rates on the money borrowed. On average, department store cards have some of the highest interest rates of any credit cards available, and Kohl’s current rate sits at 23.99 percent, as of early 2015.

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Full Answer

The average APR for retail store credit cards hovers around 23.23 percent, which has climbed another 2 percent since 2014. This rate is over eight percentage points higher than the average rate for general-purpose credit cards, explaining how and why the department store cards can be so profitable.

Despite the extremely high interest rates, shoppers have begun to use retail credit cards at an increasing rate, as these cards accounted for over $270 billion in sales just last year, according the Federal Reserve. The cards also often partner with banks or other companies and offer deals or discounts, allowing the cards to be as multifunctional as possible while also encouraging spending.

The Kohl’s credit card currently is partnered with Capital One Bank in order to give customers as much buying power as possible with the card, as cards linked with banks typically are able to be used anywhere, versus a store card that is exclusive that particular store.

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