Co-branded cards: Evaluate these factors and decide if they fit your needs

In their march to sign up more customers, banks are increasingly partnering with different service providers and online platforms to come up with co-branded credit cards. Today, card issuers in India offer co-branded cards in collaboration with travel, fuel, retail and e-commerce brands. These cards carry the partner’s name and offer comparatively higher benefits on spends made with their respective partners. The partnering brands, in return, get better visibility and higher consumer stickiness.

However, just like most financial products, co-branded cards lack universal utility. Their suitability largely depends on the consumer’s spend habits, lifestyle and brand loyalty, if any.

Here are some crucial factors that consumers need to consider before opting for a co-branded credit card.

End-use of reward points/cash backs

Co-branded credit cards offer higher rewards points, cash backs and other benefits on making credit card spends at partner brands. While spends made at other non-partner brands also accrue reward points, they can usually be redeemed for spends made with the partner brand.

For example, in the case of co-branded cards offered in partnership with airlines such as Indigo, Vistara and Air India, the accumulated reward points or free vouchers can only be redeemed for air travels made with the respective airlines. Similarly, co-branded cards offered in partnership with online travel portals such as Makemytrip or Yatra can only be redeemed for spends made at the respective travel platforms. In the case of brand-neutral travel credit cards, the accumulated reward points or vouchers can be redeemed for booking any airline tickets or for buying select merchandises or services.

A few co-branded cards also directly credit the cash backs in the credit card statement or allow the accumulated reward points to be adjusted against the card bill or for other merchandises and services.

Joining and renewal benefits

Like non-branded cards, co-branded cards also offer free vouchers and reward points as welcome and renewal benefits. These welcome and renewal benefits can help you recover your joining and renewal fee in part or entirely. However, these free vouchers or other joining benefits can only be redeemed with the partner brands.

Joining and renewal fees

Co-branded cards, especially in the travel category, usually come with higher joining and renewal fees than most of the other credit cards categories. The annual fees for the co-branded credit cards in the travel category can go up to Rs 10,000, with the renewal fees costing up to Rs 5,000. The annual fees of co-branded cards launched in the shopping or e-commerce categories start from Rs 500 onwards.

Some co-branded cards also waive annual fees on spending beyond a pre-set threshold amount in a year. Hence, a cost-benefit analysis should be carried out before opting for a particular co-branded card. As a rule, opt for a co-branded card only if the potential savings in the card benefits outweigh its costs.

Other card benefits

Many co-branded cards offer various additional benefits in the form of dining discounts, fuel surcharge waiver, lost-card liability cover, free movie tickets, special discounts for select offline or online transactions, etc. You must factor in these additional benefits and see whether they match your spending habits.

A co-branded card offering a wider range of benefits can add significant value for the card holder and reduce the need for availing brand-neutral credit cards.

Conclusion

Opt for a co-branded card only if you frequently spend a sizable amount on co-partner brands. Else, opt for a brand-neutral credit card suiting your spend habits and needs. If selected and used well, co-branded cards can significantly reduce your purchase cost through their reward points, cashback, discounts, free vouchers, complimentary tickets (in case of co-branded travel cards), etc. Many upscale co-branded cards, especially in the travel category, also offer various lifestyle benefits such as complimentary access to airport lounges and golf courses to their card holders.

Additionally, before opting for a particular co-branded credit card, factor in its joining and renewal fees and check if they outweigh the cash backs, discounts and monetary equivalents of reward points, free vouchers and other card benefits. Also, ensure you redeem the accumulated reward points and free vouchers before they expire.

(The writer is CEO & Co-founder, Paisabazaar.com)