Co-branded credit cards: What they are and how they work
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No matter where you shop, it always feels like there’s a rewards credit card offer waiting for you at the checkout line. The advertisement promotes a number of benefits if you apply today — discounts, rewards points and other exclusive offers you can only get by holding the brand’s co-branded credit card.
Once reserved for airlines and hotels, more and more businesses are introducing co-branded credit cards to their customers. Household names like Apple, Expedia, PlayStation and Uber have all introduced credit cards over the years, and they want you to add them to your wallet. But do these types of cards make sense for your spending?
While co-branded credit cards offer a lot of benefits, they usually make the most sense for brand loyalists. Before applying, it’s important to understand how co-branded cards work and whether or not they’d be a good fit for you.
What are co-branded credit cards?
Under a co-branded credit card arrangement, a company — like an airline, hotel or retail store — will partner with a bank to offer credit cards bearing their name or loyalty program. In turn, the bank will offer those credit cards to individuals, with the additional perk of earning rewards every time they use the card.
Co-branded cards were first created as loyalty bids by major airlines. Today, there’s no limit to the number of brands offering perks for signing up for the right credit card. From Starbucks to Sam’s Club, a number of companies offer their own co-branded credit cards and provide a variety of benefits and rewards for using them.
How do co-branded credit cards work?
Co-branded credit cards combine the best aspects of store credit cards with traditional rewards credit cards. However, instead of just offering flexible payment terms at one retailer, cardholders can use a co-branded card anywhere and get rewarded for using it.
The biggest draw of co-branded credit cards is that cardholders can earn rewards every time they use their card. Points, miles and cash back rewards aren’t free — and odds are, the bank is paying less than one unit per dollar spent to pass them on to you. To offer those rewards, the banks will pay a premium to the airline, hotel or other partners to distribute them.
For the travel industry, co-branded credit cards aren’t just about getting people on the aircraft. Rather, rewards cards are a major boost to their bottom line annually. In the case of airline miles and hotel points, the credit card company buys the rewards from the carrier or hotelier in bulk and hands them down to the customers. For example, in 2019, American Express paid Delta Air Lines [PDF] over $4 billion to deliver Delta SkyMiles to their cardholders.
Best co-branded credit cards for 2022
While there is seemingly no limit on the number of co-branded credit cards to choose from, we selected some of the best cards in their respective categories. If you’re looking to travel, shop online or simply save some money, these are the cards you’ll want in your wallet.
Citi / AAdvantage Platinum Select World Elite Mastercard*: Best airline card
- Welcome offer: 50,000 AAdvantage miles after spending $2,500 within the first three months of account opening
- Rewards rate: 2 AAdvantage miles on eligible American Airlines purchases; 2X miles at gas stations and restaurants; 1X miles on everything else
- Annual fee: $99, waived for the first 12 months
With the 50,000-mile bonus (earned after spending $2,500 within the first three months of account opening) and rewards rates on select purchases, your imagination will be the only thing holding you back from going places with the Citi® / AAdvantage® Platinum Select® World Elite Mastercard®.
This card also comes with travel perks like your first checked bag free (for you and up to four companions on the same reservation) on domestic American Airlines itineraries, preferred boarding on American flights, no foreign transaction fees, a 25 percent in-flight savings on food and beverages and a $125 American Airlines flight discount, after you spend $20,000 or more during your card membership year and renew your card.
Hilton Honors American Express Surpass Card*: Best for hotel nights
- Welcome offer: Earn 150,000 Hilton Honors bonus points after you spend $3,000 in purchases on the card in the first 6 months of card membership. Offer ends 04/05/2023.
- Rewards rate: 12X points on eligible purchases at Hilton hotels and resorts; 6X points at U.S. restaurants, U.S. supermarkets and U.S. gas stations; 3X points on all other eligible purchases
- Annual fee: $95
Some of the perks you’ll get with the Hilton Honors American Express Surpass® Card include a Free Weekend Night Reward if you spend $15,000 in a calendar year, complimentary Hilton Honors Gold status, the path to Hilton Honors Diamond status when you spend $40,000 on eligible purchases during a calendar year, a complimentary Priority Pass Select membership with 10 free lounge visits each year (enrollment required) and no foreign transaction fees.
Hilton is one of the largest hotel chains in the world with 18 brands and over 6,000 properties. No matter where you go, there’s likely to be at least one Hilton hotel nearby. If you can spend enough to earn one free hotel night, this hotel credit card will bring value every year beyond the first year.
Hotels.com Rewards Visa Credit Card: Best for casual travelers
- Welcome offer: Up to three reward nights (worth up to $125 each, excluding taxes and fees) — earn two reward nights after spending $1,000 within the first three months of account opening and one more reward night after spending $4,000 within the first six months
- Rewards rate: 1 stamp for every $500 spent with your card; 1 stamp (as a rewards member) per night at eligible Hotels.com properties
- Annual fee: $0
Casual travelers will appreciate the simplicity of the Hotels.com® Rewards Visa® Credit Card. Instead of collecting thousands of points and being locked into one hotel program, this co-branded Visa credit card lets you earn reward nights at nearly any hotel. And with no annual fee, there’s nothing but upside for casual travelers holding this card.
When you collect 10 stamps with this card, you’ll earn one reward night for Hotels.com bookings. Other perks with this card include cellphone protection, Silver membership status and trip interruption/cancellation insurance — all of which are rare with no-annual-fee cards.
Amazon Prime Rewards Visa Signature Card*: Best for Amazon shopping
- Welcome offer: Up to $150 Amazon gift card upon approval
- Rewards rate: 5 percent back at Amazon.com and Whole Foods Market; 2 percent back at restaurants, gas stations and drugstores; 1 percent back on all other purchases
- Annual fee: $0 ($139 Amazon Prime subscription required)
We all do a lot more online shopping these days — so why not get rewarded for it? With the Amazon Prime Rewards Visa Signature Card, you’ll get 5 percent back at Amazon.com and Whole Foods Market and 2 percent back for spending at restaurants, gas stations and drugstores. Smart spending in these bonus categories could help you offset the annual $139 Amazon Prime membership, which you need to hold this card.
Some other card benefits you’ll get include Visa Signature perks, travel accident insurance, lost luggage reimbursement, baggage delay insurance and purchase protection.
Costco Anywhere Visa Card by Citi*: Best for wholesale store shopping
- Welcome offer: N/A
- Rewards rate: 4 percent cash back on eligible gas and EV charging purchases, including gas at Costco (for the first $7,000 per year, then 1 percent); 3 percent cash back on restaurant and eligible travel purchases; 2 percent cash back on all Costco and Costco.com purchases; 1 percent cash back on all other purchases
- Annual fee: $0 with your paid Costco membership ($60)
The Costco Anywhere Visa® Card by Citi offers some of the most generous cash back rates among all co-branded credit cards. Of course, it’s best for those who shop for groceries and home goods in bulk at Costco since you can only redeem your rewards once per year at Costco for Costco purchases or cash back.
The card benefits you’ll receive are slim, but you’ll get basic credit card protections like $0 fraud liability, 24/7 customer service and roadside dispatch. You’ll also get access to Citi Entertainment, which comes with access to exclusive events and experiences.
Is a co-branded credit card right for you?
The biggest allure of co-branded credit cards is the promise of ongoing rewards you can turn into cash back, free flights or better vacations. But should you start carrying around cards that bear the logos of your favorite brands? Before you apply, be sure to understand when it makes the most sense and when you should think twice.
Pros of co-branded cards
Rewards for everyday spending. Earn points or miles with airlines or hotels without stepping foot in an airport, hotel lobby or doing any online spending.
Bonuses at your favorite brands. You’re going to spend at your favorite brands anyway — why not multiply the rewards? With a co-branded credit card, you can often earn bonus points, miles or cash back for purchases at your favorite stores.
Super-charged rewards value. Collecting points and miles over time can turn into deeply-discounted airline tickets or free hotel nights, often easily outweighing the annual fee every year. And that doesn’t even include the card perks and credits you’ll get with many travel-focused cards.
Cons of co-branded cards
Rewards are limited to one brand. With most co-branded credit cards, your rewards are limited for use with the branded company only. For example, the Costco Anywhere Visa gives you cash back, but you have to redeem it at a Costco store. Even with airline cards, your choices are subject to their program rules.
Don’t expect to use your points immediately. Although co-branded credit cards often come with big sign-up bonuses, you may not get to use them for a few months or more. The average rewards redemption threshold varies among programs, meaning it may take some time (and spending) to earn enough to use them.
Finding award options can be difficult. For those who have never done it before, finding award options with airlines and hotels can be a challenging experience. Unless you are comfortable navigating award charts, a co-branded credit card may not be the best option to gain big returns.
Alternatives to co-branded cards
If you’re unsure about carrying a co-branded credit card (or several), there are other options that might serve you better. For example, many travel credit cards offer flexible points that can be transferred to airline and hotel loyalty program partners. You’ll often get more value out of your points this way, too — points transfers to high-value airline or hotel partners can be worth up to 2 cents per point (or more) depending on the credit card rewards program.
There’s also nothing wrong with using cash back credit cards to earn flexible rewards that can be used toward anything you want. Simply spend as you normally would with the card and use your built-up cash back balance to pay off charges. Although there are often other ways you can redeem your rewards too, such as shopping with merchant partners.
The bottom line
Co-branded credit cards offer an easy way to earn rewards for travel, shopping or even video games and free coffee. However, the points, miles or cash back you earn are only as good as your ability to use them. Before you apply for a credit card, be sure to have a plan for how to use the rewards (and ultimately earn enough rewards to offset any annual fees).
*The information about the Citi® / AAdvantage® Platinum Select® World Elite Mastercard®, Hilton Honors American Express Surpass® Card, Amazon Prime Rewards Visa Signature Card and Costco Anywhere Visa® Card by Citi has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuers.