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A co-branded credit card is the result of a deal between a credit card issuer and a non-credit card brand. Common types of co-branded cards include airline and hotel credit cards, but you can also find co-branded credit cards from big box stores, automobile manufacturers, entertainment companies and all sorts of travel brands. These partnerships allow brands to build stronger connections with their loyal customers, and allow you to receive special perks from the brand.
How Co-Branded Credit Cards Work
Most co-branded cards work just like other credit cards, but they often offer brand-specific rewards and benefits. Co-branded cards also often offer rewards in the brand's loyalty program. With certain cards, for example, you can get additional points per dollar spent on certain purchases made through the co-branded company.
As with other types of credit cards, you may be able to carry a balance. Or, if you pay your balance in full each month, use your card to finance purchases without accruing interest. Co-branded cards also often offer the same types of purchase protections, benefits and insurance that are commonly found on all credit cards, such as zero liability for unauthorized purchases.
One potential difference between co-branded credit cards and other credit cards is that some co-branded cards are closed-loop store cards. Closed-loop cards can only be used at the brand's stores. With open-loop cards (co-branded or otherwise), you can use the card anywhere that accepts the associated credit card network—American Express, Discover, Mastercard or Visa.
Some brands also offer both closed- and open-loop cards. It might be easier to qualify for the closed-loop card, but consider the cards' varying benefits, how you plan to use the card and check your credit score before applying.
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Benefits of Co-Branded Credit Cards
The specifics vary depending on the card, but co-branded credit cards tend to offer benefits, such as:
- Status in a loyalty program
- Bonus rewards when you use the card
- Annual benefits, such as coupons or free hotel night vouchers
- Ongoing brand-specific benefits, such as free shipping, extended returns, free checked bags or statement credits when you make purchases from the brand
Co-branded cards might also offer benefits that aren't specific to the brand. For instance, many travel brands have co-branded cards that don't have foreign transaction fees. And brands that don't have a loyalty program might still have co-branded cards with cash back rewards.
Should You Get a Co-Branded Credit Card?
Co-branded credit cards can be a great addition to your wallet, but you may want to have a specific reason for opening the card before you apply. Three potentially good reasons are:
- You want a new everyday credit card that you can use to earn rewards in one of your favorite loyalty programs whenever you shop.
- You want to save money by using the card for specific purchases, such as booking airline tickets with a card that gives you free checked bags.
- You don't plan on using the card often but will use one of the card's benefits, such as free airport lounge access or an annual hotel night voucher.
When you're ready to apply, you may be able to fill out an application online or in a store. But first, review how applying for a credit card can affect your credit scores and consider if having a new card might lead you to overspend. If the card has an annual fee, also weigh the benefits you'll receive against the cost.
If you do decide to apply, review the current welcome bonus offers for new cardholders. Sometimes you can get a coupon for your next purchase or bonus rewards if you meet certain requirements. However, you might only be able to receive the welcome bonus offer on a card once—or once every couple of years. So, make sure you can meet the requirements and will get a good value from the bonus offer.
Check Your Credit Score Before Applying
Your credit history and credit scores can affect your eligibility for a new credit card, including co-branded credit cards. Check your credit score for free to see where you're at and get tips on how to improve your credit score. You can also use tools from Experian to compare current credit card offers—including co-branded credit cards—based on your unique credit profile.