With recent offerings of co-branded credit cards from prominent Indian corporates such as Reliance, Tata, Aditya Birla, and Adani, you might be wondering if one is right for you.

These credit cards are born from strategic partnerships between banks and specific brands, including retail outlets, e-commerce platforms, airlines, travel agencies, fuel stations, and even Fintechs and NBFCs such as Onecard Fi and Poonawalla Fincorp. They have gained popularity by promising accelerated rewards and exclusive benefits tailored to specific consumer demographics. However, before signing up, consider these factors to determine if a co-branded card aligns with your spending habits and financial goals.

Brand loyalty

Assess your loyalty to specific brands. Do you consistently shop at a particular store or frequently fly with a specific airline? Co-branded cards are advantageous when used for purchases within their partner’s ecosystem, offering higher reward rates and exclusive perks. If your spending is spread across various brands, a general rewards card might be more suitable, providing broader earning potential and redemption flexibility. For instance, co-branded credit cards such as Standard Chartered’s EaseMyTrip, SBI’s Yatra, and ICICI’s MakeMyTrip offer flexible travel options and discounts on hotel bookings.

Annual fees

This fee varies among card issuers and might be waived if your annual spending crosses a certain threshold. While this can be enticing, it might lead to overspending just to avoid the fee. If you think your spending won’t reach the threshold, weigh the value of the rewards against the fee to determine if you’ll recoup the cost through regular use. Alternatively, you can opt for no-fee cards such as ICICI’s Amazon Pay card.

Interest rates

Co-branded cards often have higher Annual Percentage Rates (APRs) compared to general rewards cards. For instance, the APR for ICICI Bank’s co-branded cards ranges at 42-44 per cent, while their general credit cards have APRs in the range of 23.9-40.8 per cent. If you only pay the minimum dues on your credit card, the interest charges can quickly outweigh the rewards earned. Responsible credit card usage, where you pay your balance in full each month before the due date, negates this concern and allows you to maximise the benefits. However, if you struggle with managing credit card debt, opting for a co-branded card with a high APR could be financially risky.

Sign-up bonuses

Evaluate the sign-up bonuses and the spending requirements needed to earn them. Many co-branded cards offer attractive initial bonuses that can significantly boost your rewards balance. However, ensure that the spending threshold is attainable without causing financial strain. It’s also essential to look at the long-term earning potential of the card, not just the initial sign-up bonus.

The bottom line

While co-branded cards often provide rewards for spending within the partner brand, some cards restrict you to redeeming rewards only at that specific business. For example, Axis Bank’s co-branded card with SpiceJet allows you to redeem earned points exclusively for airline purchases.

You may be loyal to a specific brand. But if you use its services, such as an airline card, only occasionally, a co-branded credit card may not be beneficial, as you won’t make enough purchases to justify the joining or annual fee. Instead, consider a card that rewards frequent expenses such as fuel or groceries. Even though individual transactions might be smaller, the frequency of these purchases can quickly add up, allowing you to accumulate rewards more efficiently.

Furthermore, ensure you meet the credit score requirements before applying, as multiple applications can negatively affect your credit score. Also, consider how the card’s credit limit will fit into your overall credit utilisation ratio (CUR), which is the percentage of your total credit limit that you’re currently using. With many co-branded credit cards now available on the RuPay platform, there is a risk of over-utilising your credit limit since you have the convenience to link your card and make payments via UPI.

It is recommended to maintain your CUR below 30 per cent, as exceeding this limit may harm your credit score and reduce your eligibility for borrowing from lenders. Finally, always ensure to pay the full outstanding amount instead of just the minimum dues to avoid incurring substantial interest charges.

By carefully considering your brand loyalty, spending habits, annual fees, interest rates, perks, and financial discipline, you can make an informed decision about whether a co-branded credit card is the right fit for your wallet.