Do you know what co-branded credit cards are, how they work and their differences? Find the answer to these questions and much more!

Co-branded credit cards are a great choice if you want to align earning rewards and discounts with your spending habits. It’s very common to find these kind of cards nowadays, and a lot of them have partnership with airlines, hotels, or retailers.

Let’s talk about what these cards are, how they work, and their advantages and disadvantages. Also, if you want to check out more financial tips on our website, you can click on this link!

What Are Co-Branded Credit Cards?

They are a joint venture between a credit card issuer (like Visa or Mastercard) and a specific brand, airline, hotel chain, or retailer. This collaboration allows the brand to offer unique rewards and benefits to cardholders who use their card for purchases. In return, the issuer gains access to a wider customer base loyal to the partnering brand.

For instance, when you use a co-branded card between a major airline and a credit card issuer, you might earn miles towards free flights with said partnering airline. This “pushes” you to use the card more frequently, benefiting both the airline (increased customer loyalty and spending) and the issuer (higher transaction volume).

How Do They Work?

Co-branded credit cards function similarly to regular credit cards. You use the card to make purchases, and you’re responsible for repaying the balance in full by the due date to avoid interest charges. However, they tend to offer an additional layer of rewards specifically tied to the partnering brand. These rewards can come in various forms, such as:

• Points: earn reward points for every dollar spent, which can be redeemed for travel, merchandise, or statement credits;
• Miles: airlines often offer co-branded cards that grant miles for purchases, allowing you to accumulate them for free flights or upgrades;
• Cashback: some offer a cashback percentage on purchases made at the partner’s stores or using their services;
• Discounts and Benefits: exclusive discounts, bonus rewards on specific purchases, or access to special perks like airport lounge access or priority boarding.

Pros and Cons of Co-Branded Credit Cards

Pros:

• Enhanced Rewards: earn rewards specifically tailored to your spending habits with the partnered brand;
• Additional Benefits: enjoy exclusive perks and discounts offered by the partnering brand;
• Approval: they might have easier approval than regular ones.

Cons:

• High Annual Fees: some co-branded cards come with annual fees that can outweigh the benefits if you don’t use the card frequently enough;
• Limited Rewards: where you earn or spend rewards might be limited;
• Temptation to Overspend: the hunt for rewards can lead you to overpay.

Is it Easier to Get Co-Branded Credit Cards?

The approval process can vary depending on the issuer’s requirements and your creditworthiness. However, co-branded cards might have slightly less stricter credit score requirements compared to some general credit cards.

Should I Get One?

• If you’re a loyal customer of the partnering airline, hotel chain, or retailer, a co-branded card can be a great way to maximize your rewards on everyday purchases;
• Carefully evaluate the annual fee (if any) and compare it to the potential value of the rewards program. Only consider if the rewards clearly surpass the cost and if you’re going to use them;
• Are you aiming to travel more, earn cashback, or build your credit score? Choose a co-branded card that aligns with your specific goals.
• Some airlines, hotels, and retailers offer loyalty programs separate from their co-branded credit cards. Consider if your existing loyalty program offers comparable benefits before applying for the card.

How to Get a Co-Branded Credit Card

Applying for a co-branded credit card is similar to applying for a regular credit card. You can apply online through the card issuer’s website and in-store. Then, the card issuers will conduct a hard credit check on your credit report. To increase your chances of approval, research the recommended credit score for the card you want before applying. Try using preapproval tools on their websites – which won’t affect your credit score – to give you an idea of your chances of being approved.

Where Can You Use Co-Branded Credit Cards?

They can be used anywhere the card issuer is accepted, unlike store credit cards, which are limited to the retailer. For example, Amazon offers both the Amazon Store Card and the Amazon Prime Store Card, which can only be used on Amazon.com and select merchants. However, Amazon also has co-branded cards with Chase, such as the Amazon Visa and Prime Visa, which can be used anywhere Visa is accepted.