Are Premium Credit Cards Worth It?
Gold—a universal symbol of luxury—is an incredibly dense, and heavy material. The colour and physical properties of gold combine to instil ways to identify luxury through our senses. It’s not particularly surprising, then, when banks introduce their premium credit cards with names like ‘gold,’ ‘platinum,’ and ‘obsidian,’ and metal cards with a luxurious heft.
Premium credit cards like these have grown in popularity, but do they really provide the value they project, or are they, like precious metals, simply status signals? Here, we’ll take a closer look at premium credit cards and whether they’re really worth it.
What is a Premium Credit Card?
Functionally, premium credit cards work like any other credit card: you borrow by spending on the card and then repay the card company back over time. They’re typically only offered to people with excellent credit scores and high salaries who are known to be big spenders and can therefore afford the costs associated with the card. Despite those costs, premium credit cards are marketed as ‘worth it’ due to the extra benefits they offer.
What Perks Do Premium Credit Cards Give You?
Premium credit cards can give you numerous perks, but some common benefits offered on premium credit cards are:
- Global travel insurance for tickets and flights booked using the card
- Exclusive access to certain airport lounges worldwide
- Rewards and points for spending, often in the form of airline miles
- Rental car breakdown or damage insurance coverage if the car was booked on the card
- Special discounts curated to your spending habits extended through partnerships with other companies
The perks offered by most premium credit cards vary extensively, so it’s best to check with the individual offering to see what perks are really available.
What’s the Catch for Premium Credit Cards?
Premium credit cards offer numerous elite perks, which begs the question: what’s the catch? There are two major drawbacks to premium credit cards. They’re very expensive, and they have tight approval restrictions. Common drawbacks of premium credit cards include things like:
- High annual fees: Premium credit card fees typically exceed £200 per year. This means that unless you strategically use all the benefits, you might not get your money’s worth.
- High interest rates: If you can’t pay your balance off each month it is best to avoid premium cards, as interest can accrue quickly.
- Strict eligibility requirements: Eligibility for premium credit cards typically hinges on having an excellent credit score and a high salary. Therefore, they’re not accessible to the average consumer.
Ultimately, premium cards are designed for high-income people who travel frequently. If you don’t fit these categories, a premium credit card probably isn’t worth the costly fees and high interest rates.
What Are the Best Alternatives to Premium Credit Cards?
Credit cards are a valuable financial tool for building credit, but using the wrong credit card can actually damage your credit score.
Finding the right credit card for you will depend on your current credit score, which influences factors like what interest rate you receive, what cards you’re eligible for, and your credit limit. Popular alternatives to premium credit cards that can build your credit score include:
Credit Builder Cards
Credit builder cards are an option worth looking into if you are just starting to build credit or have poor credit that you’re looking to repair. By making timely payments on a credit builder card, you can improve your credit score over time and apply for a card with more perks.
Rewards Credit Cards
Rewards credit cards are one of the best options if you have a decent credit score, but don’t want to pay the annual fees associated with premium credit cards. Many rewards credit cards do not have an annual fee.
The credit score required for a rewards credit card can vary, but you usually need a good or excellent score for rewards cards with no annual fees and beneficial rewards. However, you may find some rewards cards you're eligible for with a lower credit score, although the rewards will be much more limited.
Supermarket Credit Cards
Some supermarkets like Sainsbury’s and Tesco offer credit cards. Depending on what you use your credit card for, you may find these cards useful. Both the Sainsbury’s and Tesco cards allow you to run a soft credit search before applying, which allows you to assess whether you’re eligible without risking the damage of the hard credit check associated with an application for the card.
Every credit card will have different eligibility requirements, terms and conditions, interest rates, and credit limits, so always do your research before applying.
Build Your Credit to Get Better Credit Card Offers
Regardless of whether you use a premium credit card, a credit builder card, or any other credit card from a high street bank, stay focused on paying your balance on time and in full each month. At the end of the day, using your credit card wisely matters more than what card you’re using.
As you establish a lengthy payment history and improve your credit score, you’ll unlock opportunities to save money and get credit cards with more favourable interest rates and rewards.
Establishing that payment history and building your credit can be a lengthy journey, but you don’t have to go through it alone. The Pave app is here to help: with bills monitoring, active credit building, and personalised credit fixes, we can help you stay on top of upcoming payments and strengthen your credit score over time.
To see the Pave app in action, download it from the App Store or Google Play today.