A few decades ago credit cards served a pretty basic purpose – they were a piece of plastic that allowed you to charge purchases. That was pretty much it. There were no reward points, cashback, not even any 0% balance transfer offers believe or not. But oh has that all changed…
Today these pieces of plastic have evolved into so much more. Credit cards have all of the above features and then some. They have even evolved beyond just financial tools… now they can be status symbols, too. Just ask all the hip hop stars that consider their black card to be as essential as the bling hanging on their neck.
But when you look beyond the hype, are these status credit cards really worth it? Do they actually provide you benefits that are worth dedicating an entire song to?!
Let’s take a look to find out…
American Express Centurion (a.k.a. the black card)
$5,000 initiation fee, plus $2,500 annual fee
American Express doesn’t publicly advertise the card, but According to Wikipedia, here are some of the main benefits it offers:
* Free phone concierge service (Not bad, but when everyone can just search Google on their smartphone, is this feature actually needed?)
* Companion airfare on international flights for certain airlines with the purchase of a full fare ticket (But as we all know, a full fare ticket is insanely overpriced to begin with)
* Access to airport clubs/lounges for certain airlines (This is actually a nice perk because airports are nightmares. Unfortunately not every airline participates and some only give Centurion members access if they have international destinations).
* Perks and privileges at some upscale, already overpriced hotel chains like the Ritz-Carlton, Mandarin Oriental, etc.
* Travel protection benefits include baggage insurance, accident insurance, roadside assistance, and emergency medical
* Free personal shoppers at stores like Gucci, Neiman Marcus, and Escada (But wouldn’t these stores give anyone a “free” personal shopper if they were spending some real dough?)
* Complimentary enrollment in Avis Rent-A-Car Presidents club and in Hertz Rent-A-Car #1 Club Gold.
* “Purchase Protection” covers eligible purchases for the first 90 days against accidental damage or theft
* The card is made of titanium instead of plastic
* No pre-set spending limit
Another popular snob card is the Visa Black Card which is issued by Barclays. They’re capitalizing on the black credit card craze by also making it, well, black! But for the $495 annual fee, you sure don’t seem to get much other that unique color. The rewards only equal out to be a 1% rebate. It does offer airport lounge access, but only a max of 4x per year. One of their most hyped benefits is free gifts for cardholders, but reportedly many of them are nothing too exciting… like a free Cross pen set.
Just like the Centurion does, the Visa Black Card also aims to position itself as an ultra-exclusive credit card. Their ads state that membership is “limited to 1% of the population.” Yes that is technically correct, but some people wrongly interpret that as meaning the top 1% richest Americans, and that’s not the case at all. It just means that no more than 1% of the population will get the card (so a max of about 3 million Americans). However truth be told, it’s probably unlikely that more than 3 million Americans would ever be willing to pay for this card in the first place!
Now let’s compare some “normal” credit card deals:
Chase Sapphire Card
$0 initiation fee and $0 annual fee (however the “Preferred” version gives higher rewards for a $85 annual fee)
* Free phone concierge service (may not be as good, but it’s a heck of a lot cheaper!)
* Reward points can be redeemed for free flights on most major airlines with no blackout dates, for any class of flight (coach, first class, business, etc).
* Benefits at Visa Signature hotels including automatic room upgrade when available, late checkout, complimentary breakfast, food/beverage credits, and guaranteed best available rate (I did a search for participating hotels in Los Angeles, they’re still upscale but way more practical than the Ritz-Carlton!)
* Travel protection benefits include lost luggage reimbursement, accident insurance, auto rental collision damage, roadside dispatch, emergency assistance
* Visa Signature “Shop America Savings” gives discounts and/or gifts with purchase at over a hundred different stores, outlets, and restaurants
* “Purchase Security” covers eligible purchases for 90 days against accidental damage or theft
* The card is made of new plastic (may not be titanium, but it still looks cool)
* No pre-set spending limit
If you don’t care about the Chase Sapphire card’s concierge service, there are dozens of other cards out there that give much better rewards than the “premium” and “snob” cards do. For example, the American Express Blue Cash gives up to 5% cash back at grocery stores, drugstores, and gas stations, plus 1.5% back on all other purchases. Best of all, the card is free! The Chase Freedom (editor’s note: this is my credit card and I love it) and Discover More are two others that give up to a 5% rebate in various categories of spending… and they too are completely free!
Verdict?
Now I’m not claiming the shared benefits are apples to apples. For example, I know for a fact the AmEx Centurion phone concierge is significantly better than the Sapphire Visa Signature, but still you have to compare the prices… one credit card has no annual fee while the other will cost you $7,500 just for the first year (the initiation fee plus annual fee). Is it really worth it when many of the best credit card deals, like the Chase Sapphire, give you a boatload of benefits that will cost you little to nothing?
Or if you’re considering the Visa Black, is it really worth paying $500 per year just for its snob value? I think anyone in their right mind would be far better off with any of the numerous (and free) 5% cash back credit cards on the market mentioned above.
If you travel extensively (like all the time) and go first-class all the way, then I could see why the Centurion might be worthwhile, but for the vast majority of those that qualify for the Centurion, the benefits just wouldn’t be used enough. I know two long-time Centurion members (and one of them has hundreds of millions) that have recently downgraded to AmEx Platinum because even with their extensive traveling, the benefits with the Centurion just weren’t worth the fees.
Over the years AmEx has trimmed the benefits quite a bit on the Centurion (like eliminating domestic first class upgrades) yet during this time, the fees keep going up… does that make common sense? I would say the primary factor driving demand for this credit card is the status and snob factor. And on that note, if you’re buying it to impress people, you might as well drop $7,500 on some gold bling instead, because at least gold has been an appreciating asset as of lately!
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
