Co-Branded Card

A co-branded card is a retail merchant credit card that is issued in partnership with a specific network processor. Co-branded cards are branded with the logo of the network processor and retailer. Such cards can earn their users merchandise discounts or rewards points when they make purchases with sponsoring merchants. 

Co-branded card relationships can be an important part of a retailer’s business. They allow the retailer to issue both single purpose cards and open loop credit cards to customers. Co-branded card relationships can be structured in a variety of ways.

In order to issue a co-branded credit card, a retailer must partner with a financial institution. Often the financial institution is the retailer’s acquiring bank. This can simplify the co-branded card transaction process and the relationship will rely on the acquiring bank’s network processor. In other cases, the retailer may choose to work with a third-party credit card provider. In all situations the network processor is the primary logo displayed on the co-branded credit card along with the retailer. American Express and Discover are two companies that provide unique co-branded card relationships since they have the capacity to serve as both the credit issuing financial institution and the network processor. Other co-branded card sponsors include Visa and Mastercard.

In all transactions, the merchant acquiring bank works with the retailer to process any electronic payment card purchases. If the co-branded card relationship is through the acquiring bank, the transaction process can be simplified, specifically in the case of branded purchases where the bank and retailer are the only two entities involved. If the merchant works with a third-party to issue credit cards, the third-party card issuer and co-branded processor will be involved.

Retailers can work with any provider they choose to establish a co-branded card relationship. Retail credit card issuance allows a merchant to offer customers many benefits. Retailers often market discounts for customers using their co-branded credit card. They also allow customers to accumulate points that can be used as discounts toward future purchases.

When a customer applies for a merchant credit card they can be approved for either a single purpose card, such as a store-specific card, or an open loop card. A single purpose card allows the customer to only use the card with the merchant. These cards are issued with a credit limit and offer customers the same standard rewards. They are not usually visibly co-branded; however, they may still follow co-branded transaction procedures.

If a customer is approved for an open loop card, such as the one Southwest Airlines offers via Chase, he or she can use the card anywhere that it is accepted. Open loop cards are generally the most visible co-branded cards since they include the network processor’s logo. They require outside merchants to use the co-branded processor and contact the card-issuing financial institution for approval. The card-issuing institution also manages the points accumulated by the customer with the merchant.