A Co-Branding Conundrum: Consumers Underuse Co-Branded Credit Cards Outside of Their Featured Brands

Abstract

Co-branded credit cards that are backed by a payment-processing network (e.g., a Best Buy Visa) can be used anywhere the payment network is accepted. In this research, we find that consumers often use co-branded credit cards in a restricted manner, however. Using data from credit card statements and scenario experiments, we show that consumers are less willing to use a reward-maximizing credit card if it is co-branded with a merchant brand that does not fit the purchase brand. We identify two mechanisms. First, consumers make assumptions about a card’s reward structure based on the featured brand on a co-branded credit card, and these assumptions limit consumers’ attention to the actual reward structure. Second, the featured brand on a co-branded credit card leads consumers to judge many purchases outside of the featured brand as a bad “fit.” Co-branded credit cards represent a significant share of credit card companies’ product offerings. This research sheds light on when and why consumers are reluctant to use co-branded credit cards broadly, offering insights that could help credit card companies refine their strategies for co-branded products and help consumers maximize their credit card rewards.

Keywords: co-branded credit cards, branding, financial decision making, attention, fit, categorization