Cash­ing in on credit

Take ad­van­tage of your re­wards on co-branded cards

Austin American-Statesman Sunday - - MONEY & MARKETS EXTRA -

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.

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