When Walmart’s credit cards were discontinued in 2024, they joined a growing list of high-profile casualties among so-called co-branded credit cards, or those issued in a partnership between a major brand and an issuing bank. Prominent cards have been taken off the market, or appear headed for breakups, after the banks and merchants couldn’t make them work.
The Uber Credit Card was phased out in 2021 just four years after Uber launched its partnership with Barclays. Chase and Starbucks shut down the Starbucks® Rewards Visa® Card in July 2023, around five years after its debut. And the Apple Card, introduced in 2019, may need a new banking partner after Apple reportedly told issuer Goldman Sachs in late 2023 that it wanted out of the deal.
The credit card market evolves constantly, and issuer turnover isn’t uncommon. But merchants like Walmart and Starbucks are some of the most recognizable brands in the world. Why are they struggling with co-branded credit cards?
Broadly, it comes down to how well the brand and the bank play together.
You need a business model that benefits both participants,” says Brian Riley, director of credit advisory services and co-head of payments for Javelin Strategy & Research, a financial services research firm. “It can’t be weighted too much on one side or the other.”
Is it a win-win partnership?
Co-branded credit cards make up 62% of consumer credit cards in the portfolios of 12 major credit card issuers, according to a report from Javelin. Those bank-brand relationships can be mutually beneficial.
When an issuing bank enters into a credit card partnership with a brand, it gains access to that company’s consumer base, to which it can sell other financial products, such as mortgages or car loans.
The brand, meanwhile, can get a financial windfall. Depending on the terms of the contract, an issuing bank might pay its brand partner for every new account opened, or for perks like credit card rewards, airline miles and free hotel stays, which are passed along to cardholders. In 2022, banks sent more than $28 billion to their major co-brand partners, according to the Consumer Finance Protection Bureau’s 2024 Credit Cards Rewards report.
“Successful co-branded cards are the product of collaboration between partners working and innovating together to match the needs of their shared customer base,” says John LaCosta, head of co-brand relationships at Citi.
Do the partners see eye to eye?
Sometimes, though, that urge to innovate can expose philosophical differences that lead to a rift, even when partners share similar goals.
In the case of the Apple Card, both Apple and Goldman Sachs were seeking to diversify. Apple has long had ambitions beyond hardware and software, and Goldman Sachs — which historically has served affluent investors and other high-net-worth clientele — reportedly bet on the card as a way to expand further into everyday consumer lending.
From the outset, the Apple Card raised eyebrows, trumpeting a variety of features: no fees; no sharing of data with third parties; no confusion on when your statement arrives — always at the top of the month, for everyone. But it gave almost no credit to Goldman Sachs. The tagline “Created by Apple, not a bank” rankled some Goldman employees, according to The Wall Street Journal, especially because those unique features had consequences for the bank’s customer service and bottom line. (For what it’s worth, the Apple Card website now reads: “Trusted partners for a different kind of credit card.”)
Underwriting for the card has reportedly been another point of contention. Apple wanted pretty much everyone to be approved, the Journal reported, despite the risk to Goldman Sachs of accepting applicants with lower credit scores.
“Goldman Sachs was more accommodating and ended up with very vulnerable receivables,” Riley says. That is, the bank took on cardholders who were prone to delinquency or default.
While nothing is official yet, the termination of the Apple-Goldman Sachs partnership is widely expected, perhaps as early as next year.
Is it viable over the long term?
The economics of the brand itself can also play a role in the success of a co-brand partnership.
Expensive Apple products are one thing. But in the case of the Uber and Starbucks cards, the amount per transaction may have been too low to create a sustainable credit card partnership. Average monthly spending on Uber rides was $107 in March 2024, according to Bloomberg Second Measure, and one Starbucks drink can be $10 or less. Issuers derive much of their income from interest and interchange fees, both of which are lower when cardholders use their cards to make fewer transactions and carry smaller balances.
“Uber has a lot of casual users, but at the end of the day, do you bring the volume?” Riley says.
The Starbucks card in particular didn’t make things easy for cardholders, thanks in part to its annual fee and complicated redemption process. Reward values varied, and to earn those rewards, you had to go through the Starbucks membership card, a separate product entirely.
In contrast, consider the value and simplicity of Target’s store card, which has been issued by TD Bank since 2013. One Target run can easily exceed $100, and many consumers make multiple trips per month. Add in the Target card’s straightforward value proposition — an upfront and automatic discount on Target purchases — and the credit card becomes a highly attractive payment option, which is good for the bank and the merchant.
‘A partner, not a bully’
When co-branded card relationships sour, the breakup can be messy. In 2016, when American Express split from Costco after a 16-year partnership, The Wall Street Journal reported that Costco wanted to extract more favorable terms from AmEx before agreeing to extend the relationship, terms that AmEx couldn’t abide. Costco eventually made the switch to Citi, but there was fallout for customers.
Tension was also present between Walmart and its issuer, Capital One, that ultimately resulted in the Walmart cards being discontinued. In 2023, Walmart sued Capital One, claiming that the issuer didn’t process payments or replace lost cards in a timely manner.
It wasn’t the first time Walmart exited a co-branded partnership. Before it teamed with Capital One, Walmart sued its previous card issuer, Synchrony Financial, in 2018. Walmart claimed that Synchrony’s underwriting standards were too strict, limiting the amount of consumers who could get approved for an account.
“You can’t have a good relationship if you try to take every nickel,” Riley says. “The issuer needs a partner, not a bully.”
