Shopping with a Target credit card is about to become more exclusive: New cardholders won t be able to use their plastic anywhere else.

Target (TGT), the nation s second-largest discount chain, will cease issuing its co-branded Visa (V) credit cards to new credit-card applicants on Thursday. The store plans to offer new qualified credit-card applicants only its private-label Target credit card, which is accepted solely at Target stores and Target.com.

The move, announced last week, is designed to generate greater retail sales for Target, as well as reduce the amount of receivables the Minneapolis-based company funds. Although existing cardholders won t be affected by the change, some consumer advocates and credit experts say new cardholders may be left at a disadvantage.

They're trying to tether cardholders to the store, and pry away business from competitors by incentivizing new cardholders to do all their shopping at Target, says Joseph Ridout, Consumer Action's consumer services manager who regularly inspects credit-card offers for the Washington, D.C.-based advocacy group.

The new card may also cost some users more. The interest rate charged on the Visa credit card is less than the rate levied on Target s private-label card. The prevailing annual percentage rate charged on Visa Target balances is currently 23.24%; the company s private-label card charges 25.24% interest.

New-card users may also find themselves with less purchasing power than carriers of the old card. Private-label cards typically offer smaller credit limits, says David Robertson, the owner of the Nilson Report, which tracks credit-card industry trends. The industry average for private-label cards is about $700, while the average on Visa cards exceeds $3,000, he says. A Target spokesman says shoppers, who otherwise would have qualified for a Target Visa, may receive higher credit limits on the Target credit Card than traditional Target credit-card account holders.

Restricting where the Target card can be used could also limit its benefits for some customers. Target s rewards program loses some strength, says Curtis Arnold, the founder of CardRatings.com. Under Target s current rewards program, shoppers receive one point for every $1 spent at Target and $2 spent elsewhere. After collecting 1,000 points, cardholders get 10% off an entire day of shopping at Target. You can t [necessarily] accumulate as many points, he says.

A Target spokesman says new account holders won t have as many opportunities to earn rewards outside of Target because they won t have the opportunity to apply for a Target Visa. However, he added that current Visa cardholders won t be impacted in any way.

Target says its existing Visa credit-card holders, which account for 95% of the company s outstanding loan balance, won t see any changes as of the announcement. These cardholders continue to use their cards wherever Visa is accepted. They ll also receive another Visa-branded card once their current card expires, the spokesman says.

Target has good reason to believe the move will lift retail sales at its own stores. In a test that began last October, the company took a portion of its guests who qualified for Target Visa credit cards and gave them a private-label credit card instead. The company found that guests who were given private-label cards but qualified for Target Visa cards visited the store more frequently and spent more than the guests who received the Target Visa, the spokesman says.

The switch to private-label cards is also aimed at reducing the number of outside purchases Target must cover for its cardholders. Although Target s charge-off rate has improved somewhat in recent months, its annualized net charge-off rate is double what it was before the recession. Adding more private-label cards to the company s portfolio, which now stands at $7.6 billion, will shrink the amount it must pay out to other vendors, says John Ulzheimer, president for educational services at Credit.com.

When dealing with a retailer you always have to consider the revenue generated by the in-store and web-based sales, says Ulzheimer. There is significant margin that Target and other retailers do not realize when available credit is used to purchase goods and services from other establishments.