Potential benefits to offering branded credit cards
According to PYMNTS, the basic idea of a company credit card dates back to Texaco's paper cards of the 1920s. It became popular in the 1980s when American Airlines and Continental Airlines (now United) teamed up with creditors for co-branded cards and numerous businesses followed suit.
"Co-branded credit cards might be a promotion worth offering for certain businesses."
Companies don't have to be household names to establish co-branded credit. But there are benefits and disadvantages to adopting this strategy, and small- to medium-sized businesses should review them carefully. They should also consider less conventional routes, such as alternative credit.
Basics of co-branded cards
As explained by WalletHub, a merchant partners with a credit company to create a co-branded credit card. The resulting payment method can be used as credit anywhere the issuer's brand is accepted, and also provide certain benefits at the merchant's locations or e-commerce sites. Businesses must apply to Visa, MasterCard, American Express or Discover seeking approval. Each issuer has its own particular requirements, but the process for all four usually takes six months or longer.
Determining the value of a card partnership
According to Advantage Consulting Group, credit card issuers expect the possibility - if not necessarily a guarantee - of generating 15,000 to 20,000 new card accounts each year. If your physical business is small but reaches many via its online presence, this is a feasible goal. What is arguably worth more to a creditor is generating repeated transactions via branded cards, but if it's unlikely for a business to even engender that many offers, it may be wise to pursue other options (more on those shortly).
WalletHub cites increased customer loyalty and the possibility of expanding a customer base as primary reasons for offering branded credit cards, particularly if associated rewards are highly appealing. On the other hand, managing the program is no simple task, as it involves monitoring customers' accounts and ensuring the partner stays pleased.
Offering alternative store credit
Instead of a co-branded card with a major issuer, SMBs may be better off providing store credit with their own cards and opening it to a broader range of customers - including the credit invisible - by using an alternative credit data platform such as PRBC Mainstreet. This way, consumers who don't look great according to FICO but are still reasonably financially savvy based on regular repayments can enjoy a variety of perks.