What are co-branded cards?
A co-branded card is a credit card that’s issued by a retailer and bears the name of both the retailer and the credit card company. Co-branded cards are often co-sponsored by a major merchant such as a chain store and frequently offer benefits related to the retailer.
Co-branded credit cards are marketed to the retailer’s customers, but cardholders can use these cards anywhere a credit card is accepted, including other retailers. Some co-branded cards offer perks to the cardholders, including earning points they can use for additional purchases at the store, discounts on merchandise, or, in the case of an airline, earning frequent-flyer miles they can redeem when traveling.
Retailers also earn several incentives from the financial institution for offering the card, such as receiving cash for each new cardholder, or receiving a portion of any fees or interest the cardholder pays to the credit card company. The retailer also shares demographic information about cardholders with the credit card company, which can be used to customize its marketing for the audience it wants to reach.
The retail partners don’t participate in determining who gets a card and how much credit they get, even though they market the card. Just like with a traditional credit card, the creditor makes all of these decisions, and bears responsibility for the risk of how customers use the card, and if they default.
Co-branded cards are not to be confused with private-label cards, which are credit cards customers can use only at a single retailer.
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Co-branded card example
Many brands issue co-branded credit cards through financial institutions. Airlines like Delta and American Airlines are among the most common, with the former issuing through American Express and the latter through Citibank and MasterCard. In addition to awarding a frequent-flyer mile per every dollar spent, such airlines offer not only sizable bonuses — tens of thousands of frequent-flyer miles — but also perks when flying like priority boarding, extra miles when shopping through the airline, and credits toward the Transportation Security Administration’s precheck program.