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Co-Branded Credit Cards: What They Are and How They Work

Credit cards for airlines, hotels and retailers have some added benefits for brand loyalists.

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If you’ve ever gone shopping, traveled on an airplane or stayed at a hotel, you’ve probably seen an offer for a co-branded credit card. Many merchants and retailers extend exclusive deals to try to entice customers to sign up for a credit card that’s partnered with their business. 

Co-branded credit cards make sense if you’re looking to earn extra rewards, but they can sometimes be more trouble than they’re worth. Here’s what to know about some of their benefits so you can decide if they’re a good fit for your spending habits.

What is a co-branded credit card?

A co-branded credit card is a partnership between a specific brand and a card issuer. For example, several airlines and hotels partner with major credit cards to provide merchant-specific rewards, perks and offers to cardholders when they make purchases. Co-branded cards typically work like any other credit card in that they can be used wherever their payment network is supported.

However, some types of co-branded credit cards restrict purchases to a specific retailer. Unlike most airline and hotel co-branded cards, some store credit cards work in a closed-loop system. Closed loop means they can’t be used except with the affiliated merchant. They also tend to have higher annual percentage rates, or APRs, than standard credit cards.

Consider signing up for a co-branded card if you shop regularly with that brand, but make sure any credit card you choose offers long-term value outside of any promotional or one-time discounts.

Types of co-branded credit cards

There are three types of co-branded credit cards.

Store credit cards

Retail credit cards, also called store credit cards, are tied to a specific brand and come in two forms: a closed-loop card and an open-loop card. They both offer perks and rewards for frequent shoppers, including special discounts or free shipping, but differ from standard credit cards in that they tend to have higher APRs, fewer redemption offers and lower credit limits, among other things. If a store credit card is a closed-loop card, it won’t offer rewards outside the retailer it’s partnered with.

Because some store cards are easier to qualify for, they might be an option if you don’t have the credit to be approved elsewhere. They could also be a good fit if you shop frequently enough at the retailer to really benefit from the perks. But because they usually have higher APRs, try to avoid carrying a balance so you won’t get bogged down by pricey interest charges. You might just be better off choosing a standard rewards credit card instead.

Airline credit cards

Similar to retail credit cards, airline miles credit cards are partnered with a specific airline brand. All the major airlines – from Delta to Southwest – offer them, and several provide great value. You’ll earn miles for your spending that you can then redeem for flights, transportation or travel packages. Airline credit cards also come equipped with perks like inflight discounts, priority boarding or airport lounge access. Just keep in mind you’ll typically have to pay an annual fee for a card with the best perks.

Hotel credit cards

Hotel credit cards are similar to airline credit cards. They’re tied to a particular hotel brand like Hilton or Marriott Bonvoy, and offer rewards for purchases that can be redeemed for hotel stays. Hotel credit cards include amenities such as elite memberships that provide extra points and exclusive perks with the hotel. But again, you’ll need to pay an annual fee to get the most optimal rewards.

The bottom line

Co-branded credit cards can offer special discounts and rewards with your favorite brands, but some of them lack flexibility and long-term usefulness. When choosing a card, make sure you can take full advantage of its benefits on a regular basis. Avoid signing up for a co-branded credit card -- especially a store card -- based on a short-term offer, and look into alternative reward credit cards before deciding.

Editors’ note: An earlier version of this article was assisted by an AI engine. This version has been substantially updated by a staff writer.

The editorial content on this page is based solely on objective, independent assessments by our writers and is not influenced by advertising or partnerships. It has not been provided or commissioned by any third party. However, we may receive compensation when you click on links to products or services offered by our partners.

Evan Zimmer has been writing about finance for years. After graduating with a journalism degree from SUNY Oswego, he wrote credit card content for Credit Card Insider (now Money Tips) before moving to ZDNET Finance to cover credit card, banking and blockchain news. He currently works with CNET Money to bring readers the most accurate and up-to-date financial information. Otherwise, you can find him reading, rock climbing, snowboarding and enjoying the outdoors.