From the May 2001 issue of Startups

There's nothing that gets Jackie Hoegger's juices flowing faster than trying to find new ways to improve Vive Paris, the upscale women's boutique she founded in Witchita Falls, Texas, several years ago. So after extensive research, Hoegger decided one way to differentiate her two-store company from competitors was to offer the Vive Paris credit card. "The credit card is another way to get our name out there and keep us on the cutting edge," explains Hoegger. "We designed our own card because I wanted it to reek of femininity and beauty. When [our customer] opens up her wallet, I wanted her to say, 'Oh my gosh, what a pretty card.'"

With annual revenues of $1 million and a business pulling in customers from up to 100 miles away, Hoegger is a prime candidate for a private-label credit card, according to Stewart Armstrong of CrediCard National Bank, a San Antonio-based limited-purpose bank that only finances private-label cards and that set up the program for Vive Paris. "Our ideal client is an owner who wants to integrate a private-label card into how they sell and service their customers--an owner who knows their customers well and is trying to get repeat business from a core group."

Finding a credit card financing company like CrediCard requires some digging, because the number of firms offering private-label cards to start-up and entrepreneurial firms has shrunk considerably as the finance industry has consolidated. But they do exist: there's CDS Group/Myreceivables.com, Bank of Louisiana and TD Retail Card Services, to name a few.

And once you find potential underwriters, there's a laundry list of other considerations: meeting minimum charge volumes, determining start-up and ongoing costs, and deciding whether you want a company that specializes in your industry. "[Such companies] understand the seasonality and nuances of the businesses you're serving," says Edward Fechner, Senior Vice President of sales and new business at TD Retail Card Services in Mahwah, New Jersey.

You'll also need to determine how much money and effort you'll put into marketing the card. Leonard Leff of CDS Group suggests a company initially invest at least $500 a month to advertise the new credit card.

All the underwriters we talked to for this piece want entrepreneurs to proactively solicit potential card holders, but remember, this is a credit application, and having the customer demographics to attract financiers is critical. If your customers are young and/or have a skimpy credit history, they may not be approved, unless you're willing to assume part of the risk. Says Fechner, "You could create a lot of ill will for [yourself] if you have to say no to better than 50 percent of your customers."

Once you evaluate your business and find an appropriate underwriter, the benefits of a private-label card are many, says Robert Buss, vice president of credit cards at Bank of Louisiana. "Your customers will have a relationship with you that they'll have with no other merchant," he says. "With in-house cards, you can reach your customers directly. You can't do that with Visa or MasterCard. If you want to run a sale on shoes, for example, you can mail an insert with the statement."

You can also advertise the benefits of your card to card users, such as deferred billing, frequent-buyer programs, skip-a-payment programs or any other promotional ideas you implement. And Hoegger discovered another bottom-line benefit: "It took away my receivables," she says. "The credit card cut them by about 50 percent, which means we can pay our invoices faster."

As with any business decision, you'll need to weigh the pros and cons of establishing an in-house credit card. In the end, what matters most is whether the card will push your bottom line further into the black.