Co-branded credit cards aren’t restricted to hotel chains and airlines anymore.
In 2017, more everyday brands started to offer their own co-branded credit cards. One example of this is Uber. Through Barclaycard US, the ridesharing company released a co-branded credit card aimed at millennials that earns extra awards on Uber rides and food deliveries.
Uber isn’t the only brand that’s doing this. PayPal and Amazon both updated their credit card offerings last year. Amazon even went as far as to introduce a new Prime-member exclusive card that gives members increased rewards on Amazon purchases.
This trend is expected to continue in the new year.
Both Starbucks and Uber competitor Lyft are both rumored to announce their own credit cards before the end 2018. If announced, these cards will likely entice customers with extra rewards for spending at their respective brands and may offer lucrative signup bonuses.
Depending on the card and its benefits, you may find great value in adding a co-branded card to your wallet. But this isn’t always the case. With so many credit card offerings on the market, it’s important for you to keep a few considerations in mind before applying for a co-branded credit card. As popular chains and brands introduce new lines of co-branded credit cards, here are a few things consumers should think about before applying.
Consider Your Loyalty to the Card’s Co-Brand
Signup bonuses aside, a co-branded credit card only makes sense if you’re a highly committed customer at the brand in question. Most co-branded credit cards offer rewards points that can only be used at the brand that issues the card. For example, when you use a co-branded card from a hotel chain, your rewards are directly deposited into your hotel loyalty account. Even then, the cards typically only offer a multiplier of one or two extra points per dollar when you spend at the brand itself.
Co-branded cards do, however, generally come with additional brand-specific benefits. For example, airline cards often come with free checked baggage for its respective airline, hotel cards may give you elite status, and some store specific cards offer free shipping or access to special sales. Take these benefits into consideration when choosing your credit card.
Beyond that, they tend to be even less rewarding, typically offering only one point per dollar spent on everyday purchases, a modest return that makes it hard to maximize rewards on dining and other everyday purchases.
Even for travel, general travel and dining cards offer a better return than their co-branded counterparts. General travel cards from big banks often give additional points for spend on both travel and dining. This is the same for business credit cards, some of which offer up to 5% back on office supply and software purchases.
Some cashback credit cards may offer a better return on purchases too. Top offers today give as much as 2% cash back on all purchases, so you don’t need to worry about multipliers. Most cash back cards let you redeem your cash back rewards in the form of a check, direct deposit, or credit card bill credit.
Consider Flexibility--or Inflexibility--with Other Rewards Programs
Map out how you plan to redeem your credit card points before you apply for a co-branded card.
For one, keep in mind that points earned by co-branded cards are subject to all other rules of the brand’s loyalty program. So if the brand’s points expire after a certain amount of time, so will the points earned by your credit card. Be sure to read through the loyalty program’s terms before applying for the brand’s credit card.
The contrast in flexibility with general travel cards and cash back cards can be stark. Many fee-free cards in these categories allow you use your points in a number of different ways. Your points are valid for as long as the account is open and in good standing, too. These cards may let you transfer your points to multiple airline and hotel loyalty programs, redeem points for gift cards, or even redeem points for cash.
Maxime Rieman is Product Manager at ValuePenguin. Educating and assisting shoppers about financial products has been Rieman's focus, which led her to joining ValuePenguin, a consumer research and advice company based in New York. Previously, she was product marketing director at CoverWallet and launched the personal insurance team at NerdWallet.
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