Report Reveals the Power of Co-Branded Cards in Boosting Loyalty and Reaching More Consumers

Issuers and merchants looking to future-proof their co-branded strategies may find the next wave of loyal cardholders in the non-prime segment — a population that’s increasingly credit-active and brand-conscious.

A new report takes a close look at co-branded cards and how they can nudge customers to be more loyal to a brand. The analysis contains important learnings for both card issuers and merchants who seek to elevate experiences for cardholders and reach new customers.

Co-branded cards “act as engines that drive customer engagement, retention, and support long-term business growth,” according to the report from Payments Dive and Concora Credit.

And co-branded cards can generate a surprising amount of revenue for businesses. Major airlines, including American, Delta, and United, earn more revenue from their loyalty card programs than they do from ticket sales, according to the report. 

Delta earned $6.8 billion in revenue from its co-branded card in 2023 while its adjusted income from flights came in at $4 billion for the year, according to a CNN news report.

Co-branded cards give businesses a platform to offer their customers rewards. And companies can use those rewards to encourage cardholders to use their cards more often when shopping with particular brands. 

For example, a co-branded card program can allow cardholders to earn points for each purchase they make with the card. But cardholders may earn more points when they use the card to complete sales with the partner brand featured on the card.

Rewards can be a powerful motivator for many people. A recent study indicated that 71% of people in the U.S. say they own a credit card that offers them cash back or rewards. And 68% say they prefer to use their credit card because of the points or rewards it allows them to earn.

For many businesses, co-branded cards can be the leading way to engage with customers, according to comments Rolando De Gracia, Concora Credit’s Chief Commercial Officer, made to PYMNTS.

“That person has daily engagement with your brand,” De Gracia said. “When they pull that card to get coffee, or they pull their card to buy something else, they’re tapping with your brand. Once someone has that kind of dedicated line of credit or they have additional reward in their payment methodology with you, the frequency of visits increases.”

The majority of credit card issuers and merchants may know the role that co-branded cards can play in driving cardholder spend and promoting customer loyalty.

But the report from Payments Dive and Concora Credit unearthed an important market segment that companies may be overlooking with their co-branded cards — people who aren’t in the top credit scoring tiers.

A study from 2024 highlights that only 14% of people who make less than $50,000 per year own a co-branded credit card. Co-branded card ownership soars to 38% for people with incomes in excess of $100,000 per year.

Offering co-branded cards to non-prime consumers can allow brands to grow with customers as they build their credit profiles.

De Gracia told PYMNTS that non-prime customers can use co-branded cards as a starter card that leads to a “graduation strategy.”

Just 14% of people who earn under $50,000 annually own a co-branded credit card.

“That strategy addresses the often-rapid credit improvement seen in non-prime consumers who consistently make payments,” the PYMNTS report said. “Unlike prime consumers whose FICO scores remain relatively stable with on-time payments, non-prime individuals … can see their credit profiles increase with haste.”

Cardholders who improve their credit scores through responsible financial behavior will likely become eligible for more prestigious credit cards. And when those cardholders are ready to apply for their next credit card, they may turn to cards offered by the same issuer that backed their initial co-branded card.

Co-branded card programs can position issuers, merchants, and cardholders for long-term success. But not all co-branded programs go off without a hitch.

Membership-warehouse operator Costco used to partner with American Express on its co-branded card offering before pivoting to Visa in 2016. 

Costco now only accepts credit card payments from Visa cards. Its exclusive partnership with Visa allows the warehouse operator to skip paying full price on transaction fees.

Costco customers are more loyal to the company than people are to any other retailer, according to reports. But some of the company’s customers have started to question the value they receive from Costco’s co-branded card, according to a new report in The Street.

Users say it is a “mediocre credit card” and point out that competing cards offer benefits that allow them to earn better rewards.

The user feedback from Costco customers underscores that companies that offer co-branded cards must consistently review the features and benefits of their card program to ensure they meet cardholder needs. 

Companies that don’t take this step risk having their card program grow stale and lose vitality in the marketplace.

For businesses that haven’t yet looked into offering a co-branded card program, the time to do so may be now. And brands that offer cards to non-prime customers have a chance to foster loyalty and grow with them as they become more responsible in how they manage credit.

“In today’s market, brands can build a significant advantage with non-prime consumers by becoming their first credit card with travel, lodging, or retail discount benefits,” De Gracia said. “The company that offers these consumers a rewards credit card is likely to become their top-of-wallet choice — staying top of mind throughout their credit rebuilding journey.”