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We, Indians, have taken to credit cards like fish to water. The sheer numbers in terms of could be and would be credit card population have made this an exciting arena for the banks and other credit card offerers. This is why we have seen a very fast pace of progress in this field. The latest product and technological developments in the international credit card scene are quickly replicated here for the Indian market. The newest kid on the block is the co-branded credit cards.

What are these and what benefit do they offer to you as a customer? Co-branding is essentially two major brands converging to enhance the usefulness and image of the product. In the case of a credit-card, it is a partnership between the issuer, say, Citibank, and a retail service-provider or a goods provider to meet customer demand more efficiently. A card issued through a partnership between a bank and another company or organization is called a co branded card. The card would have both the bank name and the store name on it. Many co-branded cards are also rebate cards that provide the consumer with benefits such as extra services, cash or merchandise every time the card is use.

Obviously the aim of the co branders is to gain market share, promote loyalty to the brand, promote more usage etc. For instance in the US, this category of credit card is one of the fastest growing in the credit card industry. Due to the MasterCard and VISA connection, co branded cards find wide acceptance, unlike proprietary cards that can only be used at the sponsor’s premises. The co branders get to a wider customer base that is better defined and could not have been targeted by one partner alone. As for the structure, the credit-card issuer is responsible for distribution, while the partner offers the benefits that differentiate between the cards and the target customers.

The benefit to the card-holder comes mainly in the form of reward schemes and discounts offered by the credit-card company. Co-branding, apart from the reward schemes with a number of redemption options, also allows for discounts at specific outlets when using the card, free merchandise, frequent buyer program similar to frequent flyer points.

Also worldwide experience has shown that some particular industries lend themselves better to the co branded card culture. Travel-related rewards and rebate programs remain hot ticket items. People find travel and ways to earn free travel very appealing. Everyday savings also popular, and issuers have carved out a place for themselves with co-branded products that offer consumers savings on products that they use everyday, for example the Shoppers Stop card. Entertainment and lifestyle -related cards is another niche like a music retail store, book store etc. co branded cards. Normally these cards offer rebates usable with the shop purchases.

The major co-banded cards on offer here in India are, the ANZ Grindlays' STAR TV World card, Indian Oil Citibank International Card, Maruti Citibank International Card and the International Times Citibank Card. In order to find out the true benefits to you as a consumer, the trick is to go beyond the hype to figure out what is standard and what is really useful.

One common feature of these cards is they are international; that is, all can be used globally and the billing is in Indian rupees. Wide acceptability due to the tie up with master card or VISA, is a standard feature. Other standard features include flexible payment plans and 24-hour assistance.

Common to all these schemes is the reward program. The cardholder earns points every time he uses the card. This is to induce loyalty in the customer. The points can be redeemed for goods or services. The problem with reward schemes is that their usefulness depends on how often one uses the card and the usefulness of the gifts on offer. It may be something for nothing but it will also probably take a long time to acquire enough points to use them.

The main differentiators are the cost, special benefits and eligibility. Eligibility is an important issue. For instance, the ANZ Card sets a higher minimum salary than the Citibank co-branded cards at RS 1.2 lakh and RS 72,000 per annum for a public sector employee and RS 96,000 otherwise respectively. The annual fee for the ANZ Grindlays card is higher at RS 1,200 compared to RS 750 for the Citibank co-branded card.

Another point of difference is the kind of reward program offered. The ANZ card claims to offer the best and exclusive rewards in India. Because this scheme offers a bonus partner program, the two partners claim one can earn 10-15 points faster than usual. Second, there is also a feature not usually available in these reward schemes, which is a transfer of points to other loyalty programs such as Flying Returns, Welcome Awards, and Oberoi Top. This could be useful.

Another particularly attractive reward scheme is that offered by the Indian Oil Card, where the points can be redeemed against fuel instead of the arbitrary gifts most others offer. The IOC Card is among the most attractive one as it offers a ``No transaction fee'' benefit at its outlets. Other card-holders would have to pay a transaction fee of 2.5 per cent when buying fuel. For those using the Card to regularly tank up their vehicles, the IOC Card could lead to substantial savings.

A card useful for regular domestic fliers is the recently-introduced Jet Airways Citibank Card. Every time the card is used, air miles accrue which can be redeemed for free flights. The tradeoff for all these free flights will be a hefty annual fee of RS 2,000 and a salary requirement of RS 1,56,000. The card is equivalent to a gold card. Therefore one needs to be a frequent flyer to get the card's full value. One is given automatic membership to the Jet Privileges scheme.

A note of caution however is the fact that while all these cards offer insurance cover, the promoters are not responsible for arranging the coverage. The cardholders have to take care of it themselves. Hidden costs include a 2.5 per cent transaction fee when using an ATM with a minimum Rs.50 charge for every use.

To answer the question we started with-Are the co-branded cards worth it? The answer boils down to cost. If the cost of owning a co-branded card is the same, or nearly so, as that of a normal `no-frills' credit card then the former is worth it, as one gets that little extra for nothing. If the co branded entity has the rational appeal of saving money and the emotional appeal with the consumer of the lifestyle the retailer represents, then it could be a really strong value proposition.

 Aru Srivastava

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