Personal Finance: Co-operating Credits

PERSONAL FINANCE: CO-BRANDED CARDS
Co-operating Credits

This time round they offer a win-win for all. The card issuer pads up his client-base, the service-provider boosts his brand image, and the customer gets value from two organisations.

By Vinod Mahanta

They're unlikely partners in the credit card business: Standard Chartered Bank and Indian Railways; American Express Bank and Mahanagar Telephone Nigam Ltd; and Citibank and Jet Airways. Yet, together they promise the kind of benefits that neither can deliver alone. Take the American Express-MTNL card, for instance. The card provides consumers a credit of 1.7 per cent on phone charges billed to card each year, besides add-ons like payment of bills at no service charge, free calling line identification (the equipment has to be yours), and facility to use the phone for payment of electricity bills and insurance premia. Or the Standard Chartered-Railway credit card that allows customers to tele-book train tickets. Or the Jet-Citibank card which promises users (target audience: frequent flyers) the ability to earn bonus points at thrice the rate of a normal card (these bonus points, termed JP Miles, can be redeemed for air tickets on Jet).

Make no mistake, this is the real thing: co-branded cards that serve a unique need of the customer-far different from the first wave of co-branded cards, which revolved around issuing a credit card to members of a certain club, or a certain profession, even to those passionate about a particular theme (wildlife, cricket). This time round, co-branding is just what it should be: a strategic partnership between a card issuer and a commercial entity. The benefits to the partners? The card-issuer increases its customer base and builds loyalty (retention is still a problem for some card companies). And the utility or merchant establishment gains in terms of brand image and business that might otherwise have not come its way. The benefits to the customer? Apart from doing everything a normal credit card does, a co-branded one offers an unique add-on. Says Harpal Duggal, 43, CEO, Standard Chartered Bank, India: ''Customers benefit (from co-branded cards) as they gain value from two organisations-usually more benefits for the same price.'' Adds Sameer Vakil, 37, Country Manager, Mastercard India: ''As customers evolve in their use of payment products, they look to gain specific benefits best delivered through co-branded offerings.'' Indeed, one out of every two cards being issued across the world today is a co-branded one.

The Real Card

there are co-branded cards and there are co-branded cards. The ones that do not offer any significant value or are targeted at a certain profession, or built around a theme (like the Stanchart Cricket Card or the Citibank Women's Card) aren't really co-branded cards. After all, what is the partner brand in these cases? Cricket? Nor are the cards being offered by bank combines, like the ANZ-Bank of Madura card or the J&K Bank-Amex Card, real co-branded cards. These are just convenient symbiotic relationships where banks that do not wish to get into the hassle of managing the back-end of credit card operations (like bank of Madura and J&K Bank) enter into a relationship with other banks (like ANZ or Amex) already in the business. The real co-branded cards are those where an issuer partners with a merchant establishment or utility (like Maruti, Indian Oil, The Times of India, and Jet Airways) to offer a distinctive add-on to the customer. Predictably, most commercial partners in co-branding initiatives hail from a few sectors: airline, telecom, retail, and automotive.

The Right Card

First things first. Never opt for a co-branded card unless you can derive a relevant benefit from it. The key word here is relevant: if you are not a frequent flier, the Citi-Jet card will not really be of use to you; or if you spend very little on petrol, the benefit you derive from the Bharat-bob Premium Card (where you earn points every time you fill gas) will be insignificant. The next step is to evaluate whether the co-branded card makes economic sense. The Citi-Jet card, for instance, carries an annual fee of Rs 2,000, as compared to between Rs 350 and Rs 750 for a normal credit card. Says Vijay Mehta, 37, Chief Consultant, Credit Card and Management Consultancy: ''Opt for the one that offers true value for money. See if there is at least one differentiating factor in the co-branded card.'' There's more: a co-branded card could come with terms very different from a normal one. Hint: read the fine-print, especially the clauses relating to the distinctive add-ons being offered. Typical grey areas revolve around issues like insurance, returns, and service quality. Don't let us frighten you, though. If you pick a co-branded card that is relevant, you could well end up having double the fun at the same cost.

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