What: New federal regulations cap credit card late fees at USD 8, impacting department stores like Macy’s and Kohl’s which heavily rely on revenue from store-branded credit cards.

Why it is important: This rule change is critical because it directly affects the profitability of store-branded credit cards, a significant revenue source for department stores already facing financial pressures. The reduction in late fees could further squeeze the financial health of these retailers, influencing their overall business strategies and customer loyalty programs.

Department stores, already under stress from soft selling trends, face a new challenge as a federal rule caps credit card late fees at USD 8, potentially slashing a lucrative revenue stream. Historically, store-branded credit cards have been vital for retailers like Macy’s and Kohl’s, not only for driving purchases but also for their substantial fees and interest earnings. These cards, issued by banks such as Synchrony Financial and managed through perks and loyalty points, encourage customer spending and retention. However, with the new cap starting this spring, these retailers must navigate the reduced profitability of their credit programs while continuing to incentivize customer loyalty and spending. This regulatory change is part of broader financial dynamics, including the rise of alternative payment options like buy now, pay later services, challenging the traditional credit card model. The impact of this rule will necessitate strategic adjustments in how department stores manage and promote their credit offerings.

Department stores face another squeeze. This time, with store credit card revenue