This post comes from my buddy Mike over at?Credit Card Forum. What do you think about paying a lot for a prestigious card? An interesting look at true rewards vs. status.
Status symbols used to be jewelry, clothes, and cars. But now our culture has a new one ? the credit card. We can probably blame the American Express Centurion ?black card? for that trend. Ever since its launch in ?99, there?s never been more obsession about how you pay, rather than what you?re actually paying for!
Does that mentality make sense? Of course not.
But on the flip side, many argue that these so-called status credit cards are actually worth the money, because of the extra benefits and features they provide. So who?s right? Rather than judge others? personal finance choices, let?s just review the facts so you can make your own decision.
Rewards vs. status?
First of all, it?s probably not very fair to lump all of these cards into a single category. The truth of the matter is that while there are a handful of cards with annual fees in of several hundred dollars or more, the rewards on them can vary greatly.
Take the Visa Black Card as an example. Coming in at $495 per year, it offers a lot of hype but what you get in return may be questionable (to put it nicely). If you fancy cash back, you will be left disappointedl; it only gives 1% with no category bonuses. Compare that to the Chase Freedom rewards which are at least 1% and up to 5%, all without an annual fee. The bottom line is there are countless credit cards out there offering a better cash rebate value.
On the other hand, some status cards really do offer a stellar rewards value. If you just so happen to be a Middle Eastern oil tycoon, then the diamond-encrusted Dubai First ?Royale? MasterCard gives up to 4% cash back ? a great deal considering there?s no annual fee (hey, it?s like getting a free diamond). The catch? You?ve got to have mucho dinero with their bank to get the card.
Benefits vs. status?
Rewards aside, what else do these cards offer? Well, their main draw is the benefits that come with them. Some are impressive, others not so much.
The Platinum Card from American Express will cost you 450 smackaroos and to add insult to injury, the first year?s fee is not even waived. Is it worth it? Well here?s an overview for some of the card?s more noteworthy benefits:
- Hotel upgrades and freebies ? It touts at least $450 in perks (per stay) at over 700 participating hotels; room upgrades, late checkout, dining credits, and more. But don?t count on getting this at the Motel 6. The participating hotels are all high-end properties which will typically set you back a few hundred per night, anyway.
- Airport Lounge Access ? Like the Visa Black Card, you get a Priority Pass membership with unlimited visits for free. However the Platinum also throws in access to airport lounges for American Airlines, Delta, and US Airways.
- $200 airline fee credits ? Each year you can get ?up to? $200 in refunds for airline fees charged to your card (costs incurred for checked bags, in-flight meals, etc). At the start of the year, you have to choose an airline (only one) which you will get this for.
- International Companion Airfare ? For participating airlines, but only if you buy a business or first-class ticket.
As you can see, these benefits are certainly nothing to sneeze at. But you have to ask yourself the question ?Will I really use them?? The Platinum Card can make a lot of sense, but only if you?re actually using the bells and whistles.
Most people aren?t jet-setting around in first-class flights to Europe and staying at the Hyatt when they get there, and hence, these perks would be useless to them. If the average Joe or Jane wanted a card for travel perks, they probably would be better off with something simpler like a Chase United Visa card which has a price tag that?s nearly 80% less. Or better yet, go for a no annual fee deal like the American Express Blue Sky or Chase Sapphire.
Whether these fancy-schmancy cards are the right choice for you or not ultimately depends upon these two factors:
1. Benefits: The cash back or rewards program that comes with a status card is rarely worth it, in and of itself. The whole reason to get one is for the benefits. To determine whether those are worth the annual fee, calculate out how often you will use them in a given year on average. If you honestly believe that you will be reaping a value at least 2-3x higher than the annual fee, then it probably makes sense to pull the trigger on an application.
2. Status: At the end of the day, some people want one of these cards for nothing but status. Even though I strongly disagree with that reasoning, I suppose it?s not much different than paying for a charm bracelet from Tiffany?s or a designer handbag from Coach. If that?s what you like to spend money on, it?s your right to do so. However I think most people would agree that investing the money would be a wiser choice!