According to MasterCard, 55 percent of all credit card spending occurs on co-branded credit cards. Co-branded credit cards benefit the issuing credit card company, the organization that is represented on the credit card and the cardholder.

What is a Co-Branded Credit Card?

A co-branded credit card is issued by a traditional credit card company or bank in conjunction with another organization such as a university, business or charity. The organization's logo is on the credit card. The credit card company handles all of the traditional services such as processing transactions, billing the cardholder and receiving payments.

Benefits to the Credit Card Company

The credit card company benefits from co-branding because cardholders and prospective cardholders have a existing affiliation with the organization. The organization that co-brands the credit card often gives the credit card company its customer or member list for marketing purposes. Marketing a credit card is much easier as a result of the affiliation that people have to the organization. Also, cardholders tend to be more loyal because of their affiliation to the organization.

Benefits to the Organization

The organization that co-brands a credit card often receives monetary compensation from the credit card company for allowing its name to be used on a credit card. Normally, the organization receives a small percentage of the credit card charges.

Benefits to the Cardholder

Many corporations offer discounts and rewards for their products and services to the cardholders of co-branded credit cards. Cardholders of university and charity co-branded credit cards have the benefit of knowing that the purchases they make on the credit card benefit the organization.

Warning to Cardholders

Although a cardholder may receive monetary benefits as a result of discounts and rewards, the cardholder must always be sure that the benefits they receive are worth the costs associated with the credit card. If the credit card requires an annual membership fee or charges a high interest rate, the cardholder may do better by switching to another credit card.

Source:

MasterCard Worldwide: Co-Branded Cards