Gap is launching a new credit card to booster loyalty, but who wants it?

Gap Inc is launching a new credit card partnership with Mastercard. It's a chic navy card, minimalist with degradé colour and a simple Gap logo. But the question is: who wants to take out a store credit card in 2022? The news comes as Gap only last year announced Barclays as its official card issuer. The fashion conglomerate, which also operates Old Navy, Banana Republic and Athleta, will migrate its current 10 million customers to its new suite of cards.

Like most retailers offering credit options, the launch of Gap’s branded card is to boost its rewards programme. Here cardholders of its new Mastercard suite will earn 5 points for every 1 dollar spent on purchases spent at Gap’s brands and 1 point for every 1 dollar for purchases spent elsewhere. The rewards can be exchanged for perks like free shipping, member events, etc.

“We are thrilled to partner with Gap Inc. and Mastercard to offer a suite of credit cards that elevates rewards and experiences for millions of loyal customers who love to shop at Old Navy, Gap, Banana Republic and Athleta,” said Bill Crabtree, Head of Retail Expansion, Barclays US Consumer Bank. “What’s more, through an annual contribution to Gap Inc.’s Do Good program, we are helping to strengthen communities through initiatives that empower and support women, youth, and the underserved to bolster our shared commitment to drive positive social change.”

As a selling point, Gap’s credit cards will have a recycled card plastic core, which uses 33 percent ocean-bound plastic collected from areas within 25 miles of a waterway, the company said in a press release.

Are branded credit cards lucrative for retailers?

Many big brands and retailers have their own branded credit cards, from Apple to J. Crew, Brooks Brothers and Express. With digital payments the need for store cards has decidedly dwindled and today only one-third of adults aged 19-28 in the USA own a credit card. Millennials are the first generation to be very vocal of its antipathy to debt, making store cards seem a scheme from the past.

The reason retailers offer branded cards is to boost customer loyalty and in turn shopping frequency at their stores. By making purchases and payments more seamless, however, retailers can build customer loyalty in other ways where a physical credit card is not the only option.

In today's digital shopping landscape store cards are not e-commerce friendly and retailers must be transparent about card fees and the small print that comes with taking out credit. Often store cards come with high interest rates as credit checks are less vigorous, with the aim to sign up as many customers as possible, rather than focus on customers who are financially secure.