Does It Make Sense To Go For Co-Branded Credit Cards?

Co-branded credit cards can come with rewards and benefits if they match your spending habits, but you need to analyze the benefits before deciding.
Does It Make Sense To Go For Co-Branded Credit Cards?
Does It Make Sense To Go For Co-Branded Credit Cards?

Co-branded credit cards are credit cards that are issued by a financial institution, such as a bank, in partnership with another company, typically a retailer, airline, hotel chain, or other brand. “These credit cards carry the branding of both the financial institution and the partner company and offer a range of benefits and rewards tailored to the customers of the partner brand,” says Adhil Shetty, CEO of  

How Co-Branded Credit Cards Work  

The key mechanism of these cards involves earning rewards or benefits based on transactions made with the co-branding partner and regular day-to-day spending. For instance, a co-branded credit card associated with a particular airline might offer bonus miles or discounted airfare for using the card to book flights or other services offered by that airline. Similarly, a retail co-branded card could provide discounts or cashback on purchases made at the affiliated retail store.  

Airline or travel cards have tie-ups with specific airlines such as Air India, Jet Airways, Vistara, Lufthansa, etc., or travel websites such as Yatra or MakeMyTrip. They offer a range of reward points in the form of airline miles. Miles are earned when booking with an existing frequent flyer program, lounge access at airports, as well as spending on other websites.  

Similarly, many banks have tie-ups with oil companies to offer co-branded fuel credit cards. For example, the Indian Oil Kotak credit card offers savings at Indian Oil petrol pumps, a fuel surcharge waiver, and accelerated reward points when spending at gas stations.  

Do Co-Branded Credit Cards Make Sense  

Evaluate the benefits a co-branded credit card offers by carefully considering your spending habits, preferences, and the specific rewards and perks provided by the card. “The value of a co-branded credit card depends on how well the rewards and benefits align with your lifestyle and preferences. It's important to choose a card that complements your spending habits and offers benefits you'll actually use,” says Shetty.  

He says it is vital to analyze your typical spending categories (e.g., groceries, dining, travel, and entertainment) and calculate your monthly spending amounts in each category.  

“Review this against the rewards structure of the co-branded card. Check how many reward points or miles you'll earn for spending in various categories. Look for bonus categories or accelerated rewards for specific types of spending, sign-up bonuses or introductory offers, additional features like concierge services, purchase protection, extended warranties, etc., partner-specific perks such as discounts, freebies, or priority services, and more,” says Shetty.  

Understand the process of redeeming rewards and assess if they match your preferences and requirements. Analyze whether these perks align with your usage and offer genuine value. Estimate potential yearly rewards considering your spending patterns, and compare this value with any annual card fee (if applicable). This helps ascertain if the benefits justify the expense.  

However, do not have several co-branded credit cards just because having them would make sense. Managing all the credit cards and paying the dues on time can be cumbersome. Stick to a couple of cards that bring you benefits.

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