You’ve heard the question probably a million times. You go to checkout and right before you pay the cashier asks if you’d like to sign up for the store’s co-branded credit cards. You (likely) politely decline and they (likely) try to list off a few of the benefits of having an open line of credit with them.
Visa, Mastercard, American Express, and Discover are the four largest credit card networks issuing cards. And, you’ll often find that retailers and businesses go through them to offer you a co-branded credit card (hence the name co-branded). So, what’s the difference? Why not just get a credit card directly through a bank?
Well, co-branded credit cards come with benefits, just like any other credit card. However, these benefits are only redeemable with that specific retailer, like at Target, Kohls or Walmart. In a way, sure, it does save you money. But, you’ll want to understand the pros and cons before signing up for a co-branded credit card.
What is a Co-Branded Credit Card?
As mentioned, a co-branded credit card is a card that’s issued by both the brand and the credit card company that’s essentially assuming the debt that’s taken out on the card. In most cases, they’re often co-sponsored by a major retailer such as Target or Walmart along with a major merchant like Visa or MasterCard.
Why? For the merchant, it’s a nice way to have more individuals signing up to do business with them. It’s a way to accrue more interest. And, for the retailer, it’s a way to build loyalty and to offer their clients special savings. Retailers also often receive incentives from the merchant for the more credit card sign-ups they get. This can look like cash incentives or a portion of the fees or interest depending on the contract they have with the institution
It’s important to note that while the benefits and rewards of a co-branded credit card are usually only redeemable at that specific retailer, you can use the credit card anywhere to make purchases. It acts as a normal credit card, meaning you can use it to buy everything from makeup and clothing to food, groceries and even flights.
And, sometimes you’ll see that the benefits are often similar to normal credit cards, too, offering perks such as airline miles and points on gas.
The Most Popular Co-Branded Credit Cards
Nearly every major retailer and brand offers its own co-branded card nowadays. Amongst them, you’ll likely have heard of a few of the most popular, such as the Target Red Card, the Delta SkyMiles Rewards Card and the Capital One Walmart Rewards MasterCard.
While each card offers its own specific terms and conditions along with its own specific perks, rewards and interest rates, here’s a general overview of some of the most popular cards so you can get an idea of the kind of perks and costs you can expect.
Capital One Walmart Rewards MasterCard: The benefits of a Walmart credit card, which is technically a Capital One credit card with Walmart perks, include 5% back on all online purchases and 2% back on in-store purchases, 2% back on travel and a $0 annual fee.
Amazon Prime Rewards Visa Signature Card: The benefits of an Amazon credit card include 5% back on all Amazon.com and Whole Foods purchases plus 2% back when you use it to make purchases at restaurants, gas stations and qualifying drugstores. To qualify, however, you need to be an existing Amazon Prime member.
Delta SkyMilesBlue American Express Card: As the name suggests, Delta partners with American Express to offer their loyal customers all of the perks of an American Express card but with Delta-specific benefits. This includes 2x miles per dollar at restaurants and on Delta purchases.
TJX Rewards Platinum Mastercard: If you’re shopping for clothes and home goods, then a TJ Maxx credit card might make sense for you. It comes with a $0 annual fee plus the chance to earn 5 points per dollar spent at T.J. Maxx, Marshalls, HomeGoods, Sierra Trading Post and Homesense.
Get the idea? Most co-branded credit cards, even other cards such as the Home Depot credit card, the Victoria Secret credit card and even the popular Gap credit card all offer great perks. And, they’re usually similar to the ones you’d get if you just signed up for a credit card straight through the merchant. So, are the added perks worth it? Let’s see.
Pros & Cons of Co-Branded Credit Cards
Is a co-branded credit card right for you? Let’s explore some pros and cons.
The pros of having a co-branded card include:
- Extra Benefits: If you’re a super-loyal customer of a brand then this totally works out for you. You’ll get all of the normal benefits of a credit card but with added perks and rewards for spending in-store (which you’d be doing anyway!).
- Feasible Rewards: Oftentimes, larger credit card companies will offer rewards that you might not use or milestones that you might not ever reach if you just use the card for store purchases and gas. With a co-branded card, you’re unlocking rewards that are feasible and redeemable, such as 5% back on in-store purchases and other discounts.
- Build Credit: As with any credit card, having one will undoubtedly help you build your credit as long as you stay on top of payments. Retail credit card and co-branded cards work the same.
And, the cons of having a co-branded card include:
- Limited Rewards: This one is particularly true if you’ve got a co-branded airline credit card. Unless only fly with Delta, taking out a Delta credit card doesn’t make sense as you can only redeem your miles with that airline. Normal credit cards will help you rack up points, miles and cashback you can use as you want.
- Brand-Specific: Unless you’re super-loyal to a brand, a co-branded credit card might not make sense. Sure, you can use your Target Red Card anywhere where they accept Mastercard. But, unless you shop at Target frequently, you won’t be getting too much use out of the other rewards.
- Hard to Maximize Savings: Most financial experts seem to recommend taking out at least two co-branded cards to make the savings worth it. If you don’t spend a lot and have a hard time keeping track of finances and payments, that can be a lot of hassle.
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