Cashing in on credit
Take advantage of your rewards on co-branded cards
Credit cards that are affiliated with brands — such as American Airlines, Uber, L.L. Bean and Ikea — are ramping up rewards for everyday purchases at restaurants, gas stations and grocery stores.
These rewards cards, co-branded by the issuer and a retail brand, were formerly one-trick ponies that were best for purchases at a single merchant only. But increasing competition has prompted companies to make the cards more useful for consumers, offering points and rewards for other types of purchases.
"This is a golden age of rewards for consumers," said John Grund, managing director at Accenture Payments, a firm that provides consulting services for banks and payment providers.
Even with sky-high rewards, co-branded credit cards aren't ideal for everyone. Here's what to consider:
1 Higher interest rates
Co-branded cards tend to carry higher interest rates than bank-only credit cards, Grund said. That makes the cards a poor choice for carrying a balance.
2 Card perks
Co-branded cards can offer benefits that bank-only cards can't. Airline cards might offer free checked bags and priority boarding. A retailer might offer regular discounts and coupons, early access to sales, free gift-wrapping or free alterations. Consider what benefits you might use the most.
3 Value of rewards
Co-branded cards usually dole out rewards in their own loyalty currency, such as United Airlines' MileagePlus miles or L.L. Bean's "Bean Bucks," which can't be spent everywhere, as dollars from a cash-back card can. And beware that you may be aiming for one goal only to see it move — retailers or airlines can raise the redemption prices at any time, which devalues what you hold.
4 Industry trends
Rewards are so rich now that it might not be sustainable. “The challenge is that these value propositions are creating very thin margins — if any at all — for the companies offering the rewards, and at some point it is likely that the rug will be pulled out from under consumers' feet,” said Eric Marks, senior director with the banking practice of consultant West Monroe Partners. Watch for issuers devaluing rewards programs by revoking card perks. In the meantime, regularly review whether the card is a good fit for you.