What to expect from this content

• An explanation of the relationship between nonprime credit scores and the rise of nonprime cobrand cards
• How nonprime cobrand cards help consumers with less-than-perfect credit build their credit histories to gain transaction flexibility
• How consumers can use the rewards and perks embedded in nonprime cobrand cards
• An overview of how nonprime cobrand cards benefit merchants

It’s no surprise that in an uncertain economy, primary banks have tightened their lending, pushing more consumers into the nonprime credit category. According to 2024 VantageScore data, more than 47 million Americans have subprime credit, meaning accounts specifically developed for prime borrowers are out of reach for a large portion of the U.S. population.

This presents a frustrating conundrum for consumers who rely on credit as a lifeline when money gets tight. Understandably, credit cards are also the preferred payment tools for people seeking safe and flexible financing. Not only are credit cards embedded with a wide spectrum of consumer protection laws, but they can be used virtually anywhere.

As increasing numbers of borrowers with subprime credit struggle to access credit accounts, they often lack the means to benefit from these protections or to improve their credit score. In these cases, credit alternatives like a nonprime cobrand card can be an accessible financing solution.

Nonprime cobrand cards offer millions of people an opportunity to improve their credit score while taking advantage of the rewards that make everyday life more convenient. Additionally, merchants who offer nonprime cobrand cards as part of their suite of payment choices provide an essential and valued service to their consumers.

Cobrand credit cards as credit-rebuilding tools

Cobrand credit cards — such as those that Concora Credit services on behalf of issuing banks — help bridge the gap for American consumers who find themselves shut out of accounts developed for prime borrowers. More individuals qualify for these cards because their decision models consider financial behaviors and other proprietary data points to assess applicants, not just traditional credit scores.

“Cobrand credit cards designed for consumers with less-than-perfect credit offer additional opportunities to access credit,” says Rolando De Gracia, Chief Commercial Officer for Concora Credit. “The best part about these cards is that they report to the major credit bureaus, meaning that if someone pays regularly and on time, they should be able to raise their credit score.”

A recent survey found that almost 90% of nonprime cardholders said it is important to them that they use credit in a way that helps them build their credit score. The opportunity to improve credit is critical because consumer credit scores, such as FICO and VantageScore, track payment history, among other factors. 

Nonprime cobrand cards benefit both merchants and consumers

Merchants can play an important role in helping these consumers access credit with nonprime cobrand cards. Up to 60% of engaged, interested consumers are being turned away from transactions due to credit limitations. The nearly instantaneous approval process for nonprime cobrand cards means better access to credit and fewer missed sales opportunities.

“Offering a cobrand card not only helps the consumer but strengthens the relationship between retailers and their most loyal shoppers,” says De Gracia, explaining that, depending on the merchant’s demographics, approval rates for primary cobrand credit cards can range between 40% and 50%.

In the past, merchants tapped into their underserved customer base by utilizing private-label credit cards as a “second-look” option for declined cobrand applicants.

“However, we’re starting to see many merchants shifting away from this approach in favor of nonprime cobrand cards,” says De Gracia. “These cards provide similar payment flexibility but allow consumers to use their credit elsewhere and benefit from loyalty programs, increasing their value to the customer.”

For merchants, this shift can lead to increased customer satisfaction, brand loyalty and a higher overall credit card approval rate, which in turn drives more consistent revenue.

Customer rewards that build loyalty

Nonprime cobrand cards also allow merchants to include a broader range of consumers in one of their most effective marketing and engagement strategies: retail credit cards and loyalty programs.

A poll commissioned by the Electronic Payments Coalition found that most Americans seeking new cards focus on accounts that allow them to earn rewards as they spend.

“With over 45 million subprime consumers in this situation, and 68% of them actively seeking more credit options, retailers have a real opportunity to serve this market better,” says De Gracia.

While many retailers offer nonprime consumers closed-loop store cards or buy-now-pay-later (BNPL) services (which work well for large purchases, such as furniture, electronics or home repairs), they limit the user to shopping at specific stores.

“We’ve found that 46% of nonprime consumers use a credit card at least once a week, highlighting the importance of regular access to credit,” says De Gracia. “However, many avoid store cards due to concerns about their limited use, which often makes them seem less valuable.”

Open-loop credit cards address these concerns by offering the purchase flexibility consumers want. These cards can be used for everyday purchases, such as groceries and gas, rather than being limited to a single retailer. And unlike many general credit cards developed for people with credit challenges, cobrand open-loop cards allow cardholders to earn rewards with the merchants they frequent, such as through retailer-incentive programs.

This makes these products versatile, long-term solutions for nonprime consumers who can make purchases, receive discounts and earn rewards as they work to grow or improve their credit.

Ready to learn more about nonprime cobrand credit solutions? Contact Concora Credit for more information.