Before Paul Dolce launched his own financial planning company in Dublin, Ohio, he worked for an energy company and helped it negotiate a deal with a bank so that it could offer a co-branded credit card. The experience left him leery of the value of these cards to consumers. To him, the very fact that so many of these cards are being offered is a persuasive argument that sheer altruism is not behind their availability.

“There’s a huge amount of money involved,” said Dolce, a certified financial planner and principal at Financial Solutions, LLC. “Enough that they can pay for all the rebates and still make money.”

Still, that doesn’t mean that co-branded cards can’t be a benefit to users. And the most important thing you can do to ensure that they are a boon and not a bust is something very few Americans actually do: Completely pay off the balance each month. “You’re going to get more value out of the card if you pay it off every month, as opposed to revolving a balance,” said Colloquy’s Ferguson. “You’re going to maximize the economic value through the rewards program while not paying higher interest rates or any other fees associated with using the card.”

Maximizing the Benefits of Co-Branded Cards • Completely pay off the balance each month • Frequent travelers may be better off using an airline co-branded card • Look closely at caps and restrictions with each program you're considering • Read the fine print and know exactly how the card works

Yet, frequent travelers who charge $60,000 or more annually may be better off using an airline co-branded card. Bob Taglin with Auriemma Consulting Group said choosing between co-branded cards comes down to what people really care about. Those who like to fly and travel a lot (and like a particular airline) should probably go with an airline card; those who put a lot of value on staying at nice hotels would do well with a hotel card; and people who prefer to drive and are enthusiastic car owners are going to appreciate the value offered by automaker cards.

That said, there are some issues to consider. One, Taglin said, is to look closely at caps and restrictions with each program you're considering. Are there blackout dates for travel? Are there point caps? "When you look at the industry, there are ceilings and caveats, so the person should look at the [card’s] terms and conditions and see if they can fly when they want to fly, [for example]," he said.

In general, people who are spending a lot are gravitating to airline cards. "The really big spenders, they tend to look for the best value with the least restrictions for something they care about, and that seems to predominantly be the airlines," Taglin said.

Getting the Most Out of a Co-Branded Card
However, most households have more than one credit card. It may make sense to go with a high-reward travel card as your primary plastic and then use the automaker co-branded plastic as your second card. For details on all of the automaker offers, see our Co-Branded Card Comparison Chart.

Given the fact that families with incomes of $100,000 and up carry around $7,136 in credit-card debt, according to the Federal Reserve's Survey of Consumer Finances, writing that monthly check or clicking to pay online may be easier said than done. So here is another suggestion experts give on maximizing the benefits of a co-branded credit card: Read the fine print and know exactly how the card works. Clearly, that means examining interest rates, annual fees and penalties for late payments. But it also means understanding issues beyond just how you accumulate points, such as how and where you can actually redeem rewards and whether those points expire after a certain amount of time. For example, holders of the Mercedes Signature Visa can, in theory, accumulate enough points to actually pay for a vehicle in full. By contrast, people who have a Lexus Pursuits Visa can apply their rewards to a maximum of 10 percent of their new-car purchase.

These details are important, insists Dolce. If, for instance, a card only allows you to earn a certain number of points per year, it essentially becomes useless once you hit that number. “If you put all your expenses on your credit card, you can rack up a lot of points,” Dolce said. “But if they get capped, all of a sudden you have a card that is not doing any good for you.” Also important to understand, particularly if awards are given out in the form of coupons, is simply whether or not you get change; if not, it’s possible to spend $100 worth of points on a $30 oil change.

Related Story: Certified Pre-Owned Vehicle Guide

These cards are also available to buyers who purchase a certified pre-owned vehicle from the automaker. For example, the BMW card is available to all registered BMW owners, including CPO and used vehicles.

"We do not offer a [separate] BMW CPO credit card.  But buyers of those cars, and non-certified BMWs, too, can sign up for the BMW Card (or the Mini Card) and when they accumulate enough points, they can redeem them according to the terms of the respective programs," said BMW spokesman Wilson Cleveland.

Lexus also allows CPO buyers to use their card, but not toward the purchase of another CPO vehicle.

"The card is available to everyone who qualifies. This could be a used-car owner, non-owner or LS owner,” said Lexus representative Kerry Rivera. “However, you cannot redeem points toward the down payment on a CPO or used vehicle — only for new vehicles, service, parts or merchandise."

Other considerations go beyond the nitty-gritty of program details. Some people strongly resist taking their cars into the dealership for repairs, which makes that common benefit useless. Another important question to ask yourself is just how devoted you are to a particular brand of luxury vehicle. Will you absolutely want to drive a Mercedes or Lexus or BMW in five years? If not, it doesn’t make a lot of sense to get one of their cards.

“People should focus on a product they have some affinity to already, because most of the automobile offers out there are going to offer similar rewards,” said Taglin. “If they’re already loyal to a certain brand, then here is a way to get even more back from the company.”

Published on 7/26/06

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