What are co-branded credit cards?

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We all have stores we love or airlines and hotels we like to frequent. It’s common to seek ways to earn something for our loyal spending. Discounts or exclusive sales are nice, but they’re the tip of the iceberg. Co-branded credit cards can be effective tools for earning rewards, receiving exclusive perks, and stretching your points. Here’s what you need to know about these credit cards and if they deserve a place in your wallet.

What is a co-branded credit card?

A co-branded credit card is a partnership between an issuing bank and a retailer. With a typical rewards credit card, you earn points to the issuing bank’s reward platform. Ultimate Rewards through Chase is one example.

Co-branded credit cards allow users to earn points or miles to the partner retailer. The card_name is one example. If you use a specific retailer, airline, or hotel a lot, a co-branded card may let you earn points or bonuses not available to people using a non-branded card. You will also see the logos of both the issuing bank and retailer on the card.

How co-branded credit cards work

Co-branded credit cards typically work like any other credit card. You use the card to make purchases, pay off the balance monthly, and earn rewards. The key difference is the rewards you earn tie back to the retailer on the card.

This can be a fantastic way to earn more points than through a regular credit card or to earn exclusive perks. If you’re planning a future trip and have a favorite hotel chain or airline, using the respective co-branded card could be an excellent way to maximize rewards.

However, it is important to know what kind of card you have. Most cards are open-loop, meaning you can use them like a typical credit card. They can be used at any retailer that accepts cards from the issuing bank, such as Chase or Discover.

Closed-loop cards operate differently. They are commonly referred to as store credit cards and only work at one specific retailer. The Kohl’s Credit Card is one such example. If you want to earn traditional rewards, a traditional co-branded card is a better choice.

When should you consider getting a co-branded credit card?

Co-branded credit cards are an increasingly popular option for users. In fact, 62% of credit card products are co-branded, according to Javelin Strategy & Research.

Here are several reasons why you may want to use a co-branded credit card:

You frequent the retailer a lot: Co-branded credit cards play on loyalty. If you spend a lot with a given retailer or use an airline or hotel extensively, it may make sense to research rewards and bonuses available via its card.

You’re planning a trip where you need the points or perks: If you travel regularly, you know how expensive it can get. An airline or hotel credit card can help stretch your budget. Travel cards often provide points or perks, such as complimentary lounge access, not available through a standard card.

You already have a loyalty account with the provider: Do you frequent a specific retailer or service provider? It may make sense to get its co-branded card. Using it may allow you to stack rewards or earn other perks, like a free night to one of its properties annually or exclusive discounts.

Pros and cons of co-branded credit cards

No two co-branded credit cards are exactly alike. Each one has its respective features that make it attractive to consumers. Here are some of the top reasons to consider a co-branded card:

You often receive unique benefits not available elsewhere
Many co-branded cards offer generous sign-up bonuses
The retailer may offer perks each year, such as an anniversary bonus or a complimentary upgrade or credit at a hotel property
It’s possible to more quickly earn a higher status in the respective loyalty club

➤ SEE MORE:Which credit cards offer elite status?

Unfortunately, there are some downsides to using co-branded credit cards. Here are several reasons why you may want to look elsewhere for your next card:

It’s common for co-branded cards to charge an annual fee
Rewards are usually tied to the specific retailer or service provider
Points can be devalued
Rewards are typically lower for general spending

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Frequently asked questions about co-branded credit cards

Thankfully, co-branded cards often operate like other credit cards. However, you may have a few questions before applying. Here are some queries people have when considering this card option.

Can I use my co-branded credit card anywhere?

Yes, you can typically use a co-branded credit card at any retailer that accepts cards from the issuing bank. The one caveat is if the card is closed-loop, thus being a store credit card. If it’s a store card, only the specific retailer will accept it.

Do co-branded cards affect my credit score?

A co-branded credit card will impact your credit score like any other card. You will likely see a slight, temporary hit to your credit score after applying. It’s best to treat it like any other credit card.

Don’t use it to overspend; pay off your bill each month and make timely payments. Ignoring those practices can negatively impact your credit score.

What is the difference between co-branded credit cards and store cards?

A co-branded credit card is open-looped, and you can use it anywhere you shop. A store card is closed-loop and works only at the given retailer. However, both can impact your credit score.

Is a co-branded credit card right for you?

Co-branded credit cards can work well for both the retailer and the consumer. They help the company get more sales, and they help the buyer earn rewards and unique benefits. If you have a favorite retailer or provider, it may make sense to learn if it has a co-branded card, as it can be a good way to optimize rewards earning. Just make sure to not use it as an excuse to overspend to earn more rewards.

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