It was always a matter of time. Target, which has said for a couple of years that it wanted to sell its credit card business, did just that. The retailer announced yesterday that it had reached a deal to sell its portfolio to Toronto-Dominion Bank, AKA TD Bank.
The deal is seen as a win-win. Target gets cash based on its receivables ($5.9 billion) to help it reduce debt as it expands into Canada. TD, the sixth largest bank in North America, according to Reuters, expands it portfolio.
According to a Star Tribune report, David Strasser, an analyst with Janney Capital Management, estimates Target can cut as much as $250 million in its interest expenses by using proceeds from the sale to pay down debt.
Target has seen rapid adoption of its REDcard since the company began offering a five percent discount on all purchases from its stores and website with its use. Consumers who use the card when shopping at Target.com also receive free shipping.
"We have a great product," Terry Scully, Target's president of financial and retail services, told the Star Tribune. "There's no question the portfolio is performing well. But we are a retailer. [The credit card business] exists to support retail sales."
The deal will maintain the REDcard program as-is and enable Target to continue earning "a substantial portion of the profits" from its credit card portfolio.