Summary of this article
Co-branded cards reward brand-loyal spending patterns.
Benefits often hide high fees and restrictions.
Choose cards matching your real spending habits.
Co-branded credit cards, floated by banks in partnership with popular brands, offer special rewards and brand-associated benefits that make them attractive to consumers, frequent flyers or regular users of a particular brand. But their benefits have conditions which are not always easy to decipher.
Here's an overview of how these cards work, why they are catching on and what lies beyond these offers.
How Co-Branded Credit Cards Work
A co-branded credit card is issued by a bank in partnership with a partner brand. Whenever you use it, you get reward points, cashback, or airline miles (if it is co-branded with an airline). For instance, an airline card can offer additional air miles on booking flights, while the card of a shopping platform can provide greater cashback on shopping. Some cards may also provide free memberships, quicker delivery facilities or early access to sales.
The structure of these cards are designed to encourage brand loyalty. The cardholder benefits only if their consumption pattern aligns with the partner category. If you tend to shop with a particular retailer or travel on a particular airline a lot, rewards can be significant. But if your consumption is dispersed, the value-added becomes minimal. So, it becomes important for you to align your actual consumption pattern with the brand partnered with the card and not make additional purchases solely for earning points.
Rise In Popularity Of Co-Branded Cards
The co-branded credit card category has developed strongly in recent years. According to information provided by Visa in December 2024, co-branded cards constitute almost 12-15 per cent of the total available credit cards during FY24 and are projected to touch 20-25 per cent by FY28.
A Redseer report that came out in 2024 put the transaction volume for co-branded cards growing at a compounded annualised growth rate (CAGR) of approximately 35-40 per cent from FY24 to FY28, and transaction value growing at 55-60 per cent during the same period.
This expansion in co-branded credit card usage comes in the wake of the overall increase in credit card business across India
According to estimates by the IMARC Group, India's credit card business was around $18.68 billion in 2024 and is forecast to be around $36.8 billion by 2033, with a CAGR of 7.80 per cent.
Co-branded cards are growing much more rapidly than the sector average, fuelled by consumer appetite for benefits being tied to specific products and by the push from the brands to reward loyal customers.
What Rewards They Offer
The most frequent rewards are enhanced reward points, cashback or miles on spending with the particular brands. A card tied to an airline can offer free lounge entry, excess baggage allowance or free tickets once you reach a specified spending amount. Retail-linked cards will, in some cases, offer exclusive discounts during festive offerings or free shipping to loyal members. The rewards make sense if you are a frequent buyer, for most rewards reside within the partner's ecosystem.
However, these perks can lose their value if redemption rules are restrictive. Some rewards are valid only for purchases made on the brand’s platform, or expire within a limited period. The value of the reward may also reduce if the partner caps the maximum monthly or annual benefits. Reading the fine print is crucial to avoid surprises later.
The Costs Beneath The Surface
Most co-branded credit cards have higher joining and yearly fees compared to regular cards. Joining fees may vary between Rs 1,000 and Rs 1,500 or even more (some could go up to Rs 5,000), as a function of the brand tie-up. An issuer may waive the annual fee when you spend more than a certain amount, but that could lead to wasteful expenditure, as well. Foreign transaction fees, interest rates and late payment charges are the same as with other credit cards and can deplete reward value very fast if balances are not paid off.
The second issue is the redemption limit. In some instances, earned points can only be redeemed within the partner's network, with minimal flexibility. If the company alters the reward scheme or the terms of partnership, your earned rewards could become worthless. Occasional users of the brand pay more in fees than they receive from rewards.
Selecting The Correct Card
A co-branded card will only make sense if your normal expenditures are highly correlated with the partner's products. For instance, a frequent flyer on a certain airline might find an aviation-tied card worth it due to lounge access, bonus airline miles and tier bonuses. A serious online shopper on a specific site could get a lot of cashback by making all purchases on a co-branded card.
But for a person whose spending is spread out over categories, a general cashback or reward card might be more suitable. The true value is not in the sign-up bonus, but in the ongoing rewards that are actually in line with one’s existing spending pattern.
