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How co-branded credit cards work and the 5 most unique ones we found

CNBC Select explains how co-branded credit cards work, where you can use them and reviews five unique co-branded cards, like one for pet lovers and another for gamers.

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The average American has four credit cards in their wallet, and sometimes that includes a co-branded credit card.

Co-branded credit cards are a hybrid between a store card and a rewards card, and since they're backed by a major network and/or a major card issuer, consumers can use them basically anywhere credit cards are accepted while accessing major perks. 

Airlines were some of the very first companies to offer co-branded credit cards to consumers, and hotels have quickly followed suit. 

Today, you can find credit cards co-sponsored by dozens of major retailers and various card issuers. Some of the most popular include the Southwest Rapid Rewards® Priority Credit Card, the Hilton Honors Aspire Card from American Express and the Costco Anywhere Visa® Card by Citi.

Below, CNBC Select explains how co-branded credit cards work and where you can use them. Plus, we rounded up a few unique examples for Trekkies, pet lovers and more.

What is a co-branded credit card?

It's likely you already have a co-branded credit card in your wallet. More and more brands (such as a retailer, hotel or airline) are teaming up a card network (like Visa or Mastercard), a bank (like Chase or Capital One) or a network/issuer (like Discover and Amex) to create credit cards that reward loyal customers. 

Co-branded credit cards display the logos of both the business and the bank/issuer. A great example of this is the Capital One® Walmart Rewards™ Card by Mastercard®, which lets cardmembers earn 5% back at Walmart.com, Walmart app, Walmart Grocery Pickup and Delivery, 2% back at Walmart stores, Walmart and Murphy USA fuel stations, restaurants and travel and 1% back everywhere else Mastercard is accepted.

Like a store card or a loyalty card, using a co-branded card lets you access discounts and special deals. However, since the card is backed by a major issuer and/or network, you can use it anywhere that type of card is accepted. And many come with the same perks and benefits that consumers enjoy from rewards credit cards, like travel insurance and emergency trip assistance.

In addition to retail and travel cards, some nonprofits also have their own co-branded credit cards so you can earn rewards that will be donating to the cause you care about. One example is the Susan G. Komen® Cash Rewards Visa® credit card from Bank of America. With each new card that remains open for the first 90 days, Komen receives at least $3 plus 0.08% of all purchases (minus returns) made with the card and $3 for each yearly card renewal (the card must be active and not have a zero balance at the time of renewal).

The Susan G. Komen credit card from Bank of America also lets cardholders earn 3% cash back in the category of their choice: gas, online shopping, dining, travel, drugstores or home improvement/furnishings and 2% back at grocery stores and wholesale clubs (on the first $2,500 in combined choice categories/grocery stores/wholesale clubs each quarter, then 1%) and 1% back on all other purchases.

Where can you use co-branded credit cards?

Many retailers give you the option to sign up for a store credit card or a co-branded card. If you choose the co-branded credit card, you'll be able to use your credit card anywhere the card issuer is accepted.

For example, the Macy's Card can only be used at Macy's stores and online at macys.com, while the Macy's American Express Card can be used anywhere American Express is accepted.

Another example is the e-commerce giant Amazon, which offers both the Amazon Store Card and the Amazon Prime Store Card, but also teamed up with Chase to offer co-branded versions, the Amazon Rewards Visa Signature Card and the Amazon Prime Rewards Visa Signature Card. While the store cards can only be used to make purchases on Amazon.com and through select "Pay with Amazon" merchants, the two co-branded cards can be used anywhere Visa is accepted. With the Amazon Prime Rewards Visa Signature Card, cardholders earn 5% cash back at Amazon.com and Whole Foods Market, 2% back at restaurants, gas stations, drugstores and 1% back on all other purchases.

For this reason, co-branded credit cards are more practical to use than store cards, especially given you'll need to go through a full application to get one. If you're deciding between a retailer's store card or its co-branded card, the latter is often the better deal. In addition to their limited use, store credit cards are also notorious for having low credit limits and high interest rates, including deferred interest. Co-branded cards offer the perks of normal store cards with better convenience. 

Since many co-branded credit cards require either a membership or an annual fee, it's worth noting that you really only get the most bang for your buck if you are loyal to using that certain brand. Otherwise, you should consider a normal rewards credit card that can earn you points or cash back on your spending anywhere.

Surprising co-branded credit cards

While most co-branded credit cards are common with airlines, hotels and stores, you can also find them in the more niche categories, such as video games and sports.

Below are a few unique ones we found.

  • For pet lovers: With the American Kennel Club℠ Visa®, cardholders earn 3X points per $1 spent at pet stores, vet offices and American Kennel Club, 2X points per $1 spent on gas and groceries and 1X point per $1 spent everywhere else Visa is accepted.
  • For Trekkies: Fans of Star Trek can apply for the Visa Star Trek Credit Card, issued by NASA Federal Credit Union, and if they qualify receive 3X points on startrek.com purchases, 2X points on gas station purchases and 1X point on every other purchase. Cardholders can also pick from four different Star Trek card designs.
  • For gamers: The PlayStation® Visa® Credit Card lets avid gamers earn 5X points at the PlayStationTMStore and on purchases of PlayStation and Sony products at authorized retailers with purchase confirmation, 3X points on their cell phone bill payments and 1X point on all other purchases.
  • For rail commuters: For those who frequently travel by rail, the Amtrak Guest Rewards® World Mastercard® offers 3X points per $1 spent on Amtrak travel, including onboard purchases, 2X points per $1 spent on other qualifying travel and 1X point for every $1 spent on all other purchases. Amtrak recently announced to its cardholders that it is also extending lounge access to its World Mastercard members through August 31, 2020.
  • For wine enthusiasts: Whether you're a wine snob or just fancy a glass now and then, there is a new credit card called the Grand Reserve™ World Mastercard® that will let you earn rewards points on purchases at wineries, wine shops and wine clubs. The card is not yet available, but interested applicants can join the waitlist here and earn 10,000 bonus points when they are approved.

The bottom line? If you are interested in earning rewards from a brand you use consistently, check to see if that merchant has a co-branded credit card to offer you.

Learn more:

Information about the Capital One® Walmart Rewards™ Card, Susan G. Komen® Cash Rewards Visa® credit card, American Kennel Club℠ Visa®, Visa Star Trek Credit Cards, PlayStation® Visa® Credit Card, Grand Reserve™ World Mastercard®, Macy's Card, Macy's American Express Card, Amazon Store Card, Amazon Prime Store Card, Amazon Rewards Visa Signature Card, Hilton Honors Aspire Card from American Express, and the Amazon Prime Rewards Visa Signature Card  has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.