Target's Credit Cards on a Hot Streak

Target Corporation, of the ubiquitous red and white bull?s-eye, is seeing unprecedented success with its credit card business. According to a story running in the Minneapolis-St. Paul Star Tribune, the credit cards have become so lucrative that the company is increasingly relying on the business to generate more of its profits.

Credit cards contributed 18.2 percent, or $162 million, to first-quarter earnings before taxes, a 60 percent jump from the year before. In fiscal 2005, credit cards generated nearly 15 percent of Target’s earnings before interest and taxes. In the previous two years, credit cards contributed around 13.4 percent.

Of course, running a credit card business has some pretty significant risks accompanying it. Most retailers partner with a bank to soften the blow should consumers not pay off their charges. However, by controlling its credit cards Target stands to reap all the benefits, and it accepts the inherent risks.

To read more about this story, go to Target’s credit cards on a hot streak.