What are co-branded credit cards, and should you get one?

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Maybe you only fly with a specific airline or stay with a specific hotel chain. Or perhaps you only shop at a particular retailer and want to score extra discounts and perks.

If that sounds like you, consider a co-branded credit card.

Co-branded credit cards come with benefits or perks tailored to a brand's products or services. This can include airline miles, hotel points, or exclusive discounts.

While this type of credit card seems niche, co-branded credit cards can be incredibly valuable for loyalists. Here’s everything you need to know about co-branded cards and if they’re right for you.

What is a co-branded credit card, and how do they work?

A co-branded credit card is a partnership between a credit card issuer and a specific brand, like an airline, hotel chain, or retail store.

These cards offer rewards tailored to the brand's products or services. For example, an airline card may offer miles for every dollar spent, while a retail card may provide discounts on purchases made at that store. The rewards earned are specific to the brand and can often be redeemed for brand-related benefits.

The goal is to incentivize cardholders to remain loyal to the brand and encourage repeat business.

Popular co-branded credit cards

Some examples of popular co-branded credit cards include:

• Delta SkyMiles® Gold American Express Card: This card provides benefits like free checked bags, priority boarding, and bonus miles for Delta purchases.
• Citi® / AAdvantage® Platinum Select® World Elite Mastercard®: This card offers perks like priority boarding, reduced mileage awards, and bonus miles for American Airlines purchases.
• Marriott Bonvoy Boundless® Credit Card: This card provides rewards for hotel stays at Marriott properties, complimentary elite status, and a free night award each year.
• Southwest Rapid Rewards® Plus Credit Card: This card offers bonus points for Southwest flights, a yearly anniversary bonus, and the chance to earn the coveted Southwest Companion Pass.
• Prime Visa Card: Targeting frequent Amazon shoppers, this card offers rewards for Amazon purchases, as well as bonus rewards for dining, gas, and drugstore expenses.
• United℠ Explorer Card: This card provides benefits like free checked bags, priority boarding, and bonus miles for United purchases.
• Starbucks Rewards® Visa® Card: This card provides rewards for purchases at Starbucks stores, grocery stores, transit, and internet and cable. Cardholders earn Stars and redeem them for free drinks, food, and more.
• Apple Card: This co-branded card by Apple and Goldman Sachs offers features such as daily cash back rewards and seamless integration with Apple Pay.

Advantages of co-branded credit cards

There are several reasons co-branded credit cards are appealing to many consumers. Here are some benefits of these cards:

• Earn rewards with a specific program: These cards provide higher rewards or exclusive benefits for purchases made with the brand. This means you can earn more points, miles, or cash back when you spend with the co-branded merchant.
• Special perks: This includes things like priority boarding, free checked bags, hotel room upgrades, access to exclusive events, early access to sales, and more.
• Loyalty program access: Co-branded cards are linked to a loyalty program associated with the partner brand. This means you can earn points or miles with your purchases and redeem them for rewards specific to that brand. It simplifies the process of earning and redeeming rewards.
• Exclusive discounts: Some co-branded cards offer discounts or special offers for purchases made with the partner brand.

Limitations of co-branded cards

The main limitation of co-branded credit cards is that the rewards you earn are typically only good for the company offering them.

These cards also come with specific terms and restrict how and where you redeem rewards.

For example, airline miles may only be good for award flights or seat upgrades with a specific airline or within an airline alliance. Hotel credit cards tend to limit redemptions to hotel stays or suite upgrades within properties that belong in the program.

Some co-branded cards, especially retail credit cards, have higher interest rates and fees. This can offset the value of the rewards if you carry a balance or don't use the card frequently enough to justify the fees.

Should I get a co-branded credit card?

If you're a loyal customer and can maximize the rewards and benefits, a co-branded card might be a good fit.

But if you spend with various brands and don’t stick to one airline or hotel chain, you’ll probably earn more rewards with a different credit card.

This way, you won't limit yourself to using rewards only with a specific brand or company.

Alternatives to co-branded credit cards

If you like earning rewards with an airline or hotel brand, consider a general travel credit card.

These flexible cards make it easier to earn and redeem rewards across various airlines and hotel chains. They often provide added benefits like airport lounge access and travel insurance.

In many cases, you can transfer rewards to a range of airline and hotel partners — so you’re not stuck with just one airline or hotel chain.

If you prefer simplicity, cash back credit cards can be a great alternative. These cards typically offer a percentage of your purchases as cash back rewards. You can redeem cash back for statement credits or direct deposit. This card type allows you to earn rewards without tying yourself to a specific brand.

The bottom line

Co-branded cards make sense if you shop in specific stores or travel with the same brands repeatedly. But they aren't for everyone.

If you plan to get a co-branded credit card, your best course of action is to use it for purchases you can afford and pay your balance in full each month.

Editorial disclaimer: Opinions expressed are author's alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.