If you take a look at most people's wallets, you will find out that over the past few years the design, photographs, and colors of credit cards has changed drastically. If you take a closer look, you will see a popular retail merchant's name engraved on the credit card. If you are wondering why a credit card would be issued under a retail merchant's name, you must know that these are co-branded credit cards.
What are co-branded credit cards?
A co-branded credit card is a credit card that is offered by a credit card company that is jointly sponsored by a retail merchant and a bank. A retailer can be an airline company, grocery store, travel agency, or any other merchants. Co-branded credit cards are gaining popularity as they are comparatively cheaper than any private label credit cards in India. This type of credit card also helps the bank access the retailer's customer base.
Often, co-branded credit cards come with a wide range of discounts, cashback, and attractive offers. Using these cards, a customer will be able to avail discounts or gather reward points on merchandise purchased from the sponsoring merchant. This type of card can also be used at any other retail store just like your regular credit card.
For example, an airline company in association with a bank can choose to offer a credit card to their regular customers. While these customers can use this credit card at any retail outlet, they can also book their flight tickets with the sponsoring airline company and enjoy exclusive discounts, reward points, and other attractive features. The bank, on the other hand, can expand their customer base by accessing the retailer's customer profiles.
Pros of having a co-branded credit card
If you want to enjoy all the benefits of a co-branded credit card, you will have to spend frequently. Co-branded credit cards are suitable for people who spend frequently as these cards are designed by a particular retailer who wishes to give a discount to their regular customers.
You can apply for a co-branded credit card online within few seconds. Make sure you compare the best credit cards available in the market online before applying for one. Unlike olden days, you do not have to walk into a bank to apply for a credit card.
By availing special discounts on your co-branded credit card, you will be able to trim your expenses if you are a frequent user. For example, using a co-branded credit card that offers a discount on your fuel bills will help you cut down on your monthly fuel bill.
Few retailers also give free merchandise to frequent customers who have used a certain amount on the card. Few traveling co-branded credit cards let their customers earn a free travel if they use their card regularly.
Most of the co-branded credit cards are international cards. This means that you can use these cards across the globe and you will be billed in your domestic currency.
Co-branded credit cards are accepted worldwide as they are tied up with either VISA or Mastercard.
Like your regular credit cards, co-branded credit cards also come with flexible repayment options and EMI facility. If you are unable to repay the total outstanding bill within one billing cycle, you can choose to pay the minimum due amount and clear the balance later.
You can use your reward points to make purchases once they get accumulated.
If you are someone who loves donating to the underprivileged, you can do so using your co-branded credit card. Few co-branded credit cards allow you to donate a specific amount towards charity every time you swipe your card.
Co-branded credit cards increase customer loyalty as these cards are designed for people who love the sponsoring brand.
What to watch out for when opting for a co-branded credit card
Most of the co-branded credit cards have significant fees associated with them. When you opt for a card, read the fine print carefully and calculate all the fees attached to the card to ensure that you do not land up paying an additional cost.
Also note that generally the reward points, discounts, cashback, and rebates you receive when you use a co-branded credit card are associated with the sponsoring brand and can be used in their outlets only. Opt for a co-branded credit card only if you use the sponsoring retailer's services frequently.
Just like your regular credit card, fees, penalties, and other charges can be levied on your co-branded credit card. If you are not clearing the bill on time, a late fee will be charged.
A significant amount will be charged if you use your co-branded credit card to withdraw cash from the ATM. Avoid withdrawing cash from your co-branded credit card until it is an emergency and you have no other solution.
Although most of the co-branded credit cards come with insurance coverage, it may not provide you complete coverage. Check the insurance details when you opt for a co-branded credit card.
You would have analysed by now that having a co-branded credit card may tempt you to spend more in order to accumulate reward points and can push you into a debt trap. Use your co-branded credit card as your regular credit card- only when it is required.
The final word
We agree that carrying plastic money, especially when you are traveling, gives you comfort. It liberates you from the pain of carrying cash on you all the time. However, this can make you spend more than your budget. Always compare credit cards online and figure out if it suits your requirements before you finalise on the credit card you wish to apply for.
Having a co-branded credit card is advised if you are very loyal to a particular brand and use their services regularly. However, you should weigh the pros and cons before subscribing for one.