April 28, 2011
Spending big dollars on a credit card may soon mean greater perks for the cardholder as competition in the premium card market heats up.
Credit card providers are beefing up rewards programs and relaxing the rules of how we redeem points in an effort to increase their share of the premium card market, the only part of the credit card market that is growing strongly.
Commonwealth Bank and Citibank were among those launching new rewards programs this month, signalling change for the broader credit cards market.
Diamonds are a shopper's best friend
In a step up from the platinum card market, Commonwealth Bank has launched a Diamond Awards Credit Card available through either MasterCard or American Express and is offering between 1.5 and three points per dollar respectively.
Points can be redeemed for any goods or service, even cash, unlike some rival cards, which only entitle you to redeem products and services chosen by the credit card provider. Using the Diamond card, customers can purchase an item and then instruct the bank to use the points to pay for it.
Other Diamond card features include a concierge service, which entitles customers to phone for shopping assistance and special access to e-stores that don't otherwise accept Australian credit cards. Points earned on the Diamond card can be swapped for travel deals and travel insurance too.
On the house
Citibank added a new Dining Program add-on service for all of its cardholders this month, which entitles you to extra points at participating restaurants, complimentary wine with your meal and an insider's guide for foodies.
However, these ramped-up rewards cards don't come cheap. The annual fee for the Commonwealth's Diamond card is a hefty $425 and the purchase interest rate is well above the market average at 20.74 percent.
The Citibank Dining Program is available to Silver, Gold, Platinum and Select cardholders. The Gold card, for instance, has an annual fee of $149 and interest rate of 20.99 percent.
Clearly, shoppers that are diligent in repaying their credit card balance within an interest-free period stand to benefit from premium cards. But with high annual fees and above average rates on most premium cards, some customers should be wary about the real cost of rewards.
By forgoing the extra perks of premium cards and opting for a standard card could save you hundreds of dollars each year, particularly if you compare credit card rates and fees online. So it's worth doing the sums to determine what is more important to you before you pay with plastic.
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