If you’ve observed, of late, the proportion of photographs, identity cards, debit cards and credit cards in most people’s wallets has changed. These days, it is skewed in favour of credit cards, the plain vanilla ones as well as the ‘specialised’ co-branded cards meant for specific purposes. These could range from travelling and shopping to dining and fuel recharge.
Elaborates T R Ramachandran, business manager, cards, Citibank India: “The core proposition of co-branded credit cards is to provide an easy and convenient payment mechanism, which also offers some extra value to the customer, in areas of his / her preference (like retail, airlines and telecom).” The value could mean rewards, discounts, special offers, etc. While some cards come at a cost, some may not entail any such charges.
The trend of maintaining several credit cards, especially of the specialised variety, seems to be catching on, as it is not uncommon to see people flaunting such credit cards and the points accumulated by using the same.
Informs ICICI Bank’s head, card group, Sachin Khandelwal: “The trend is indeed catching on. In the past couple of years, significant value additions and benefits have emerged. Also, out of the thousands of merchants and a dozen broad categories like dining, air travel, hotels, consumer durables and jewellery, for most customers, the maximum spends on cards are usually on just one or two specific categories. Hence, they would like to see better rewards, not only in terms of more points, but also benefits like quicker miles, free room nights and so on, which are more tangible. With co-branded cards you get all these at a much accelerated pace, hence a preference has been seen.”
So what is it about such credit cards that has resulted in the demand shooting up? Answers financial planner Gaurav Mashruwala: “People opt for such cards to get focused benefits. All cards offer some kind of loyalty benefits.” For example, if you’ve been flying a particular airline or shopping at a particular store, it makes sense to go for a card meant for such purposes that enables you to avail of associated discounts and gift vouchers.
Every time you use the card, you gather points, which act as indirect discounts. The points can be redeemed in return for some tangible benefits. The logic is simple: You would be paying visits to petrol refill outlets anyway, why not use a fuel-recharge credit card and collect points, which would help you cut down on your petrol bill?
Moreover, in case of certain cards, every time you swipe the card, a specific sum goes towards charity; you can choose a credit card that serves your purpose and also aids the cause of the charity you wish to extend support to. Some cards also cater to hobbies and interests. Use of such cards could enable you to free tickets to music concerts or cricket matches.
A word of caution
“Use of co-branded cards calls for close scrutiny of the benefits that you receive,” points out Mr Mashruwala. For instance, for purchases worth Rs 10,000, one co-branded credit card promises 200 points that translate into goods worth Rs 200, which means that the total discount is 2%; on the other hand, for the same amount of purchases, another credit card promises 200 points that entitles you to a free gift, which may not be worth more than Rs 100. The effective discount here is just 1%. Making such a thorough comparison is essential to ensure that you get a good deal.
Mr Khandelwal feels the users should meticulously track their usage and know where they are spending. One also needs to make sure that if he / she has more than one card, he/she is using the right card, that is, the one that provides better offers or more rewards.
“While choosing a card, it is important that you opt for a card that not only best serves your needs, but also adds maximum value to your spending. These value additions could either be in the form of cash through a cash-back card or in kind through aviation points, petromiles, free talk time etc,” says Mr Ramachandran.
“Users need to be aware that in case of co-branded credit cards, eventually, it is the credit card issuer, the bank, that will handle the complaints, and the not the co-brand partner,” states Mr Mashruwala.
This apart, the general rules for use of any kind of credit card apply to specialised cards as well: keep your identification number under the lock and key, do not exceed your credit limit, go through your credit card statement carefully and touch base with the issuer immediately if you come across any discrepancy.
The rising default rate in the country is likely to affect the growth of the second largest card issuer in the country, SBI Cards. The company is expected to report a loss for the second time in a row. 
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