Premium Credit Cards – Are they Losing their Lustre?

Source: stck.xchng Photo by tnimalan
Source: stck.xchng Photo by tnimalan

Many of us who carry premium credit cards do so because of the wide range of benefits that they offer that help us simplify our lives and manage time. Some of us also crave the attention these exclusive credit cards bring. However, these cards come with stiff annual fees and in an economic downturn, and ongoing retrenching of the credit card benefits, it is natural to take a stock of the value we receive in return for our investment.

Exclusive Credit Cards, barriers to enter the club are getting smaller

Consider the epitome of exclusivity, the American Express Centurion Card, also affectionately termed as the black card. Issued by invitation only, this card comes with a great array of services that if properly used, more than pays for its $2,500 US annual fee. However, substantially similar and comparable services are also offered to American Express Platinum card holders at only $400 US annual fee. Now it is true that Amex Platinum is more commonly available and the level of prestige offered by a Centurion card is unsurpassed. But then, if you are looking for a good brand with great benefits and value for money, Amex Platinum is hard to beat. The annual spend requirement to get a black card from American Express is $250K in US which I would presume would be hard to maintain for many in the financial services sector who were likely a large portion of its customer base.

MasterCard and Visa have entered the fray as well to fill the niche. MasterCard World Elite and Visa Signature are trying to offer the similar levels of exclusivity and no preset spending limits but with smaller annual fees. These cards are still difficult to qualify for and acquire but are open for anyone to apply. Barclays is now offering its version of the Visa Black Card (carbon graphite card), which they estimate that only top 1% of the US population will qualify for. The annual fee is $495 and the card comes with 24/7 concierge service, airport lounge access and gifts from luxury brands.

Credit Card Benefits getting retrenched

Amex Platinum recently discontinued its free companion flight ticket program as American Express struggles to maintain profitability. Some World  MasterCard Elite cards do not offer free airport lounge access but require you to pay a small fee for use. Slowly and surely, some of the value of owning these cards are getting eroded.

The problems here are two fold. First, there are too many cards chasing a very small segment of the population. And Second, the segment of the population is getting smaller still as the economic crisis runs its course. Therefore in order to make these premium credit cards viable, companies are cutting down on the benefits and starting to offer these cards at lower price points, which although still stiff, make these card a little less exclusive than these companies would have us believe.

One Response to Premium Credit Cards – Are they Losing their Lustre?

  1. The problem with credit cards right now is that people either don’t want to spend or the banks don’t want to lend. As the economy balances out they’ll shoot up in popularity again until next time.

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