Co-Branded Credit Card: Definition, Benefits, & How They Work

22 NOVEMBER, 2021

What is a co-branded credit card & what are its advantages?

When you compare credit cards, you find each has some unique features. For example, a credit card may not incur a maintenance fee or may offer certain discounts on buying from a particular merchant. In addition, credit cards are increasingly teaming up with brands to offer special discounts to loyal customers. Such credit cards are known as co-branded credit cards.

What is a Co-branded Credit Card?

A co-branded credit card is a hybrid credit card issued by a credit card company through a tie-up with a particular brand. Let’s understand it in detail through an example. Metro Trains are prevalent modes of transportation in many Indian cities. Lakhs of people use these trains for their daily commute. Issuing tickets or recharging the wallets of many people daily will require a massive ticketing infrastructure. It will add to the cost, too. City Metros are using the technical solution and popularity of credit cards to help the situation. They are increasingly teaming up with leading retail bankers and offering co-branded credit cards. These cards can be used to recharge Metro wallets or even as a wallet or smart ticket. You can consider co-branded cards as regular credit cards sponsored by a merchant you frequently use.

It’s A Regular Card

However, these cards also offer all the features and qualities of a regular credit card. The same idea can be replicated with any company that wants to use the popularity of credit cards. As a result, you have a large number of co-branded credit cards all over the world.

How to Get a Co-branded Credit Card

You get a credit card for co-branded services like any other credit card. You will have to provide necessary papers such as proof of income, residence, identity, and KYC details. These cards are offered in association with a company, so you need to ask for them from the credit card issuing company. Not all credit card companies offer all co-branded credit cards. So, you need to know the credit card company that provides a co-branded card for a particular company you are interested in.

How Co-branded Cards Are Different from Regular Cards

A co-branded card is not much different from a regular credit card. It only allows you a memorable experience while shopping at the merchant which has sponsored the card. The card may have the logo of the merchant too. Apart from this, a regular credit card must be used with proper discretion and restraint. You can compare credit cards from different companies to know the relative advantages.

Credit Card Cautions

On the due date, payment to the credit card is an essential factor that you should not lose sight of. Any default or late payment will reflect in your credit score. In addition, if you don’t maintain financial discipline or be financially irresponsible, your credit card spending can lead to financial troubles.

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Advantages of Co-branded Cards

For a customer, co-branded cards bring many advantages. You can compare different credit cards to see how they try to offer advantages as co-branded services. Here are a few examples:

Discounts, Loyalty Bonuses

A co-branded card aims at giving benefits to its loyal customers. The benefits will come as discounts, bonuses, and reward points. When you make a purchase with these cards, the merchant may offer you a cash-back or any of the benefits mentioned above. Giving these benefits through electronic transactions into your card can be programmed and made entirely free from human interference. This quality of co-branded cards helps companies offer benefits to a large number of customers. Using this method of ensuring customer loyalty helps companies scale up customer engagement and increase sales.

Customization

Co-branded cards can be customized for different needs and different sets of customers. For example, we have discussed the case of co-branded cards issued by Metro train networks. Popular fast-food chains also offer such cards for their loyal customers. Similarly, airlines, railways, oil companies, and others with large customer bases often find co-branded credit cards of much use in their loyalty retention exercise. In America, co-branded credit cards are available for pet lovers, fans of Star Trek, Gamers, Wine enthusiasts, and so on.

Summing up

Merchants use unique credit cards, called co-branded credit cards, to benefit their loyal customers. These cards also help them offer special offers and services.