Why Premium Credit Cards Are More Popular Than Ever


When 26-year-old John Liston applied for the Chase Sapphire Reserve®, he was not deterred by the card’s $ 450 annual fee (which has since increased to $ 550 as of January 2020). That’s partly because you didn’t see it as a $ 450 annual fee.

“I don’t have a car, and to me, I knew I could easily spend $ 300 with Uber and Zipcar each year just by moving around Boston,” he says, referring to the card’s $ 300 travel credit, which is automatically applied to rides. costs, including car rental and carpool services. “When you do the math there, you are seeing only $ 150 in one fee.”

As a frequent flyer who lives in Boston and works at a startup, Liston estimates that he also gets hundreds of dollars worth of value from the card’s Priority Pass Select membership, which gives him access to more than 1,000 airport VIP lounges internationally. He says he has squeezed several plane rides and a car rental from the sign-up bonus, which was 100,000 Ultimate Rewards points at the time he earned it, but has since been Cut in half – with points to spare.

Liston isn’t the only one doing these initial calculations. Despite annual fees for premium credit cards that can cost more than $ 400, issuers say customers claim them. With travel benefits that can easily offset those fees, premium cards may seem less of a waste and more of a practical purchase to some travelers.

Frequent flyers find a golden goose

The travel industry is booming. Companies emerging in the so-called “sharing economy,” such as Uber, Lyft, and Airbnb, have made travel more accessible to more people.

Air travel is also becoming more common. In 2016, the number of passengers boarded planes reached new highs for both domestic and international flights, according to data from the Bureau of Transportation Statistics dating back to 2002.

Considering that, it is not surprising that there is more interest in premium cards, which commonly include these benefits: f

  • Travel statement credits or airline fare credits, with a value of between $ 200 and $ 325 a year. Airline fare credits cover checked baggage fees and upgrade charges, while travel statement credits cover greater variety of travel expenses.

  • Access to the airport VIP lounge, which can cost more than $ 400 a year

  • TSA PreCheck or Global Entry Refund. The first costs $ 85; the last one costs $ 100; both last five years.

  • Transferable points, that can be carried over to the loyalty programs of the major airlines and potentially redeemed for a higher value

These benefits attract people like Lou Haverty, 37, who works in finance and travels to visit clients five to six times a month. Haverty, who blogs about his travels on The first-class travel guide and lives in Philadelphia, applied for the Citi Prestige® Card about two years ago.

“You look at the $ 450 annual fee and say, ‘If I’m going to travel anyway, [I] get $ 250 for airfare, ‘”he says. “So you’re really looking at a $ 200 annual fee.” He used the card on a recent vacation, visiting four countries – Germany, Australia, Singapore and the United Arab Emirates – in just two weeks.

Pay for a business class flight From Singapore to Frankfurt, Germany, he transferred his Citi ThankYou points to the Singapore Airlines frequent flyer program. He estimates that he earned about 4.7 cents from each mile, excluding taxes and fees, much more than the usual 1 cent per mile. He also used the card Complimentary 4th night stay benefit both in Germany and Australia.

“I wanted to come up with the most expensive trip possible that I could take and pay the least amount of money for it,” he says. The huge benefits of his premium card made it possible.

Broadcasters find a hungry audience

These days, issuers market premium credit cards to generally well-to-do consumers, not just the super-rich.

Between 2012 and 2014, for households reporting income of $ 150,000 to $ 199,000, the estimated median spending on credit cards grew 18.3%, according to a Mercator Advisory Group 2016 Report. This inspired more credit card issuers to offer rewards that appealed to the lower end of the affluent market, according to Mercator.

Perhaps the utilitarian benefits in the Chase Sapphire Reserve® – like the 3 points earned per dollar spent on food and travel – made the card particularly resonate with the well-to-do but not millionaire segment.

“While we knew we had designed an excellent card, frankly, we were even surprised by the feeling it became,” says Gordon Smith, executive director of consumer and community banking at Chase, at JPMorgan Chase 2016 Annual Report. “We exceeded our annual target of clients in less than two weeks.”

The shift towards practicality and mass appeal can also be seen in other issuers. The Platinum Card® from American ExpressFor example, you recently added an annual Uber benefit of $ 200, while making other changes to your card.

“We have seen record growth in [the] number of new Platinum members in the US over the past year, ”said Janey Whiteside, senior vice president of global cargo products, benefits and services at American Express, via email. “In fact, we have more Platinum card members today than ever in our 33-year history.”

“Since its launch, the Citi Prestige portfolio has consistently exceeded our targets,” said Jennifer Bombardier, a Citi spokeswoman, in an email. “From 2014 to 2016, the portfolio increased six-fold, and the number of millennial cardholders more than doubled.”

‘Because the card is great’?

Aside from function, a factor that contributes to the popularity of premium cards could also be their flash. Letters like the Chase Sapphire Reserve®, The Platinum Card® from American Express and the US Bank Altitude Reserve Visa Infinite Card are made of metal, rather than plastic.

“There is something really magical about the metal card,” says Bob Daly, senior vice president of retail payment solutions at US Bank. “The analogy I will make is with a well-made car. You know that when you close the door of a well-made car, it just makes that solid ‘thunk’ sound? Not so small, like a less well-made car? I think similar connotations can be made with the metal card. “

Lately, metal cards have been popping up everywhere. Luxury Card, whose credit cards are issued by Barclaycard, recently announced that it had patented a gold-plated credit card. Several websites now advertise that they will transform your plastic cards into custom metal cards if you mail them. credit cards with lower annual fees they are getting into the action.

Not everyone is a fan. “I think the dumbest thing in the premium card game is ‘Give me a metal card,'” says Joe Brancatelli, business travel writer and founder of JoeSentMe.com, a site for business travelers. “I’m not interested in impressing the lady at Walmart with how heavy my card is.”

Brancatelli’s business card for travel, and the card that he recommends to his readers, is The Platinum Card® from American Express. (Your site is ad-free and dependent on readers’ subscription fees.) But he cares about the benefits of the card, not the metal construction.

“Look [premium cards] as you would see any other purchase, “says Brancatelli.” Why would you give American Express $ 550? Why would you give Chase $ 450? … If your answer is because the card is great, then not only the credit card companies have outgrown it, but the airlines as well. “

Is a premium card right for you?

If you’re drawn to the siren song of a premium card’s big sign-up bonus, generous benefits, or metal construction, but you travel only once a year, go with another credit card. TO refund card or a travel card with a lower annual fee could be a better decision.

Premium cards are also not a good option for people who are dealing with debt or who have lower credit scores. If you plan to carry a balance, look for a Credit card 0% APR to dodge high interest. And if your credit score is regular, look for cards marketed for people with fair or average credit.

But if you are a frequent traveler who enjoys traveling in luxury, is never in debt, and has a good or excellent credit score, a premium card might be the perfect option for you.

Compare the benefits and find a card that suits your travel style. See if you are pre qualified to get a higher registration bonus before applying. You might be surprised to find out how much issuers are willing to offer in exchange for space in a wallet that has traveled extensively.

To view rates and fees for The Platinum Card® from American Express, watch this page.

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