Making optimum use of co-branded credit cards
A co-branded credit card is designed to provide customers with benefits and features tailored to enhance their shopping experience. Such credit cards are extremely popular, rewarding cardholders with cashback or points, discounts and benefits on their favourite brand.
In the recent past, various banks, online e-commerce platforms, retail giants and merchants have launched co-branded credit cards. It’s a win-win situation for customers and banks at times.
In April, Axis Bank collaborated with Shoppers Stop to unveil the Axis Bank Shoppers Stop Credit Card. Last month, ICICI Bank and Adani One, the digital platform of the Adani Group, announced the launch of two variants of co-branded credit cards. Cardholders can get Adani reward points on spends within the Adani Group ecosystem, which includes the Adani One app. This can be used for booking flights, hotels, trains, buses and cabs, along with spends across Adani-managed airports and others.
In March last year, HDFC Bank and the Indian Railway Catering and Tourism Corporation Ltd (IRCTC) launched co-branded travel credit cards.
A co-branded credit card is a hybrid credit card issued by a credit card company or bank, through a tie-up with a particular brand, to offer a product that comes with various benefits, and expands the scope of card use.
According to the recent RBI Benchmarking India’s Payment Systems-Follow-on-Exercise Report, the growth in credit cards (CAGR of 17 per cent from 2017 to 2020) was fuelled and driven by co-branding partnerships, digital distribution, innovative business models and seamless customer onboarding processes. Banks partnered with non-banking financial companies (NBFCs), fintechs and e-commerce merchants for unique customer propositions.
Industry estimates suggest that one in three new credit cards issued today are of the co-branded variety. Currently, there are nearly 80-odd variants of co-branded cards. However, before opting for it, consider a card that meets your spending habits.
Tailored Awards
In case of co-branded credit cards, it enhances rewards for purchases with the partner brand, be it for shopping, travel or dining. So, the customer should assess his or her loyalty to specific brands.
Potential for high spending
It is beyond doubt that co-branded credit cards treat you with special discounts or cashbacks, or even priority check-in at international airports. However, the lure can lead to unnecessary or over-spending.
Annual fee
The annual fee varies among card issuers and might be waived if your annual spending crosses a certain threshold. Though the offers seem to be tempting, these can disturb your budget if you spend beyond your limit to avoid the fee. Alternatively, you can opt for credit cards which do not charge annual fees.
Interest rates
Although co-branded cards make the relationship with the brand more engaging and rewarding, the interest rates can be higher compared to general credit cards, if the balance is not paid in full. So, use a credit card just like your debit card, when you know you have the capacity to pay in full.
— Vijay C Roy
