The real cost of fancy credit cards

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If your idea of credit card rewards includes VIP treatment, exclusive behind-the-scenes art viewings and private masterclasses with celebrity chefs, then make sure you compare what the latest credit cards offer. But watch out for the tough restrictions.

June 30, 2010

A new credit card niche is appearing in the market, which is set to challenge the traditional platinum, high-end credit cards. Citibank is the latest to break through the platinum card market, which has created a signature credit card with Visa.

The Citi Select card targets high-income earners who make at least $120,000 per year and comes with an annual fee of $700. As a benefit cardholders will receive "uncapped rewards" and exclusive offers including masterclasses with celebrity chefs and exclusive access to art exhibits.

The card is currently available in North America as well as several Asian markets, where Citibank hopes the product will counter the view that platinum cards are "too mainstream for high net-worth clients," the Australian Financial Review  reported.

Rewards with the price tag
RateCity's data showed there was several hundred dollars worth of difference when comparing the annual fee for the signature card against platinum cards, which are known to comprise some of the highest annual fees in the market.

For example, American Express' Qantas Ultimate Card has an annual fee of $450 per year, followed by $395 for American Express' Platinum Credit Card, then $295 per year by Westpac's Altitude Platinum American Express or MasterCard and $290 per year by NAB's Qantas Platinum American Express or Visa.
When it comes to comparing rewards and benefits, the list is full of interesting rewards, such as:

  • ¬†American Express Platinum Credit Card offers a free domestic economy return flight or a night's stay at a hotel every year.
  • Westpac's Altitude Platinum MasterCard offers exclusive pre-sales of entertainment tickets.
  • And American Express Platinum Card offers invitations to exclusive events with "VIP treatment".

It pays to find the right card for you
RateCity conducted a study that showed if you don't spend much on your credit card you may be losing out by paying high annual fees and exorbitant interest rates. It found that you would need to spend at least $16,000 to receive a free Sydney to Melbourne return flight from the four major banks' rewards credit cards.

The study also showed that if you don't pay off the balance in full each month, the rewards points you earn may cost you more in interest charges than they are worth. For instance, if you had a $10,000 credit card debt and paid the minimum 3 percent of the balance ($300), with an interest rate was 18 percent (average platinum credit card rate) you would be charged $145.50 for that month in interest, or potentially the cost of a flight from Sydney to Melbourne.

To find the right credit card to fit your lifestyle and spending habits, it pays to compare credit cards online to find one that best suits you and save.


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