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What are cobranded credit cards and should I get one?
Earn accelerated points and additional perks and benefits.
Cobranded credit cards are a great way to earn higher rewards at your preferred retailer, airline or hotel. In addition, you can get discounts and benefits that bank credit cards usually refrain from offering. However, make sure to pay your balance on time to avoid high interest rates.
What are cobranded credit cards and how do they work?
Cobranded credit cards are issued jointly by a financial institution and a retailer. Companies that participate in cobranded credit cards are:
- Cruise liners
- Gas retailers
- Department stores
- Online stores
Compare cobranded credit cards
There’s a variety of cobranded credit cards. Compare different options and choose the one you’ll likely use the most.
Benefits of cobranded credit cards
Cobranded credit cards are meant to reward brand loyalty by giving you such benefits as:
- Higher rewards rate. Earn accelerated points when you make purchases at a specific store. In a number of cases, you can get a value of around 5% back on your purchases made at the retailer with this type of card.
- Signup bonus. Get bonus offers after meeting the spend criteria. Depending on your card, this could be worth a round trip flight across the US, several hotel nights or a gift card for the retailer.
- Brand benefits. Get brand-specific benefits. For example, you could get a first checked bag free, priority boarding, lounge access and in-flight purchases using an airline cobranded card. You could also get free Wi-Fi, complimentary breakfast and credit to spend at a hotel chain, or discounts and member-only access to sales of certain items at a retailer.
- Elite status. Upgrade to elite status tiers with hotel and airline credit cards after meeting certain criteria. This comes with additional perks and benefits, such as free seat and room upgrades, accelerated points earning and more.
- Complimentary flights and hotel stays. Earn a companion certificate with an airline cobranded card. Earn free hotel nights with a hotel cobranded card.
- Additional rewards. Earn accelerated points on other categories unrelated to the brand. For example, you could get accelerated points on dining, gas, groceries and more.
Drawbacks of cobranded credit cards
Cobranded credit cards have many benefits. However, there are some drawbacks to consider.
- Higher interest rate. You could offset any rewards by having to pay higher-than-average interest rates if you fail to pay your balance on time.
- Promotional financing trap. Some retailers let you make purchases and carry your balance with a 0% interest for as long as 48 months. The catch is — you must pay your balance in full before the promotional period is up or you’ll pay interest accrued from the date you made your purchase.
- Limited points spending. Some credit cards let you only redeem points at the retailer. However, most hotel and airline credit cards let you transfer or redeem points for partner airlines, hotels and car rentals.
- Annual fee. Most cobranded credit cards have a $0 annual fee. But if you want to get better perks, be ready to pay an annual fee from $99 up to $550.
Is a general travel card or cobranded airline card better?
This mostly depends on your spending. For example, if you fly with different airlines and stay at different hotels, a general travel card is the better choice. The benefits of this type of card include:
- Earn accelerated points at almost all airlines
- Earn accelerated points at almost all hotels
- Transfer reward points with partner airline and hotel programs
- Earn accelerated points at additional categories, such as dining
- Get general perks like access to a variety of airport lounges or get travel credit
But if you preffer one airline, getting a cobranded credit card is generally the better option. That’s because, you get:
- Higher reward points for the airline purchases than you would earn with general travel card
- Airline-specific perks like priority boarding, free checked bags, discounts on in-flight purchases and access to the airline’s lounges
Cobranded credit cards can be a great addition to your wallet if you’re loyal to a brand of retail stores, gas stations, hotels or airlines. You will earn accelerated points on your purchases and you’ll get brand-specific benefits.
But if you use the retailer’s services occasionally and you don’t spend much money there, other credit cards may be a better option.
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