Co-branded credit cards: the pros, cons and management of easy debt

Co-branded cards now account for one-third of MasterCard's U.S. card base and 20% of Visa's. As the inebriant of the power of plastic wears off, sophisticated consumers need to carefully review the costs and benefits associated with these cards. Understand that credit cards serve two basic purposes: one, a means of payment, and two, a source of credit.

About one-third of credit card users use them as a method of payment and pay the balance in full each month. Those consumers able to wipe the slate clean every month are generally in the higher income brackets. With credit card interest rates going as high as 20%, the benefit to the holder is an immediate savings on interest rates.

The largest percentage of credit cardholders, however, are installment users who consider credit cards an alternative method of financing and carry a balance from month to month. Financial advisers across the board point out that these consumers are perched on the edge of a gaping pitfall.


The interest rate on the credit card frequently wipes out the perks. By the time you have made enough purchases to qualify for free flying tickets or product discounts, you probably could have paid the price straight out for what you've paid in interest charges.

On the bright side, when you add up the annual fee and typical interest rate for each card and then subtract the value of the rebate, the air fine and auto cards produce an overall better bargain than conventional cards.

For cynical consumers who acknowledge that the retailers and credit card companies are really out to get them, there is a strategy for playing one company against the other. Use the incentive card for purchases and rack up the credits you need for discounts on your heart's desire.

Supported by Visa and MasterCard, the list of co-branded cards is growing.
Offshore Pro Group