Businessman Vivek Ahuja makes frequent air trips and is constantly looking for ways to reduce his travel expenses.

He's found the solution in a co-branded credit card. Not just any card, but an Indian Airlines American Express Gold Card, which is specially designed for frequent flyers.

Not only does Ahuja get discounts of 25% and 15% on business class and economy fares each time he buys an air ticket with his card, he also gets extra baggage allowance, discounts on hotel rooms and free accident insurance cover.

Though Ahuja has to fork out a steep annual fee of Rs 5,900 for the card, he feels the benefits more than make up for it. "The amount that I put in every year is so much lower than the discounts I get every time I travel. For me it's a win-win situation," he says.

Co-branded! What's that?

A co-branded credit card is a credit card that a bank offers in conjunction with a service provider or retail outlet.

Should you use this card to avail of the services or buy products at that outlet, you get a host of discounts, reward points and other benefits.

From the bank's side, it makes good business sense. Says B Madhivanan, General Manager, ICICI Bank [Get Quote]: "It's a good brand-building exercise for the banks as they get to associate with another strong brand, and also tap the marketing skills of the companies. The banks can also target niche segments and niche spends."

For a user, there are many advantages to a co-branded card.

Not only do you get discounts on frequent purchases, you also get reward points each time you make a purchase which you can exchange for gifts and other freebies.

Says Parag Rao, Vice-President and Head, Credit Cards, HDFC Bank [Get Quote]: "Co-branded cards offer cardholders the value benefits of two partners. They are more attractive, with specific benefits that appeal to those customers in need of those features."

For instance, the ICICI Bank-HPCL Credit Card for motorists offers a waiver on fuel surcharge on fuel purchases, plus reward points.

The HDFC Bank-IDEA Cellular card has benefits like discounts on postpaid bill payments and mobile handset insurance.

The LG-SBI card has discounts on the purchase of consumer appliances while the MTV-Citibank card gives free and exclusive entry to discotheques, reduced rates at pool parlours etc.

However, Rao believes that the future lies in multi-brand partners that will provide customers with even more benefits across a wider range of spend categories on one card.

When it is an asset

A co-branded card will benefit you most if you need a lot of repeat purchases, like fuel, mobile phone subscriptions, airline tickets or shopping at a particular outlet. These purchases must account for a significant share of your monthly expenditure.

"In such a case," say Rao, "the benefits are tangible and apparent to customers and the value-additions can be availed of more easily."

Manish Dokania, Executive Assistant to the MD at Hindalco [Get Quote], and his wife, have opted for an ICICI-Big Bazaar credit card. "I already have a regular ICICI card and since my wife was looking at getting a credit card for herself, we opted for the co-branded one. It rewards points for every Rs 100 that we spend on purchases at Big Bazaar and that has provided us an additional incentive to shop there regularly," he says.

Shivraj Mandlik, who is Regional Manager at Team Healthcare World, a multinational in Mumbai, has been using the ICICI-BPL Mobile card for a year.

He admits to having been skeptical when he was approached by a salesperson who wanted to sell him the card. But he's more than happy with it now. "Since I travel quite frequently, it makes sense to use the card, as it provides discounts on domestic and international air tickets. Besides, my mobile handset is also insured against damage, loss or theft," he says. Mandlik also gets reward points that can be redeemed for more airtime.

"If you are a regular shopper at places like Big Bazaar, Shoppers' Stop and others, it makes sense to use co-branded cards. You can enjoy discounts from the shop and earn reward points at the same time," says Madhivanan.

Rajeev Pillai, Associate at Morgan Stanley Mumbai, went in for a MTV-Citibank credit card, which provides benefits such as free entry to nightclubs and invites to MTV concerts and parties. But since he gets very little time for partying now, Pillai feels he has not been able to make adequate use of the card's offers and benefits.

Raman Ahuja, who is self-employed, keeps getting offers of co-branded cards by one company or another, but he isn't biting. Ahuja already has a UTI-HP card, but he uses it rarely as he feels that the reward points are insignificant and haven't been of much help.

Check out the offers

To get the maximum benefit from a co-branded card, you must ensure that it's of a product/ service that you use regularly.

If yes, then you might as well get all the benefits associated with spending.

The most common co-branded cards are for airlines, petrol and retail stores. Click here to get a quick look at what these cards are currently offering.