Premium Credit Cards: The Value Beyond the Cost

A premium credit card is a step above your average card: better rewards and extra perks offered at, well, a premium. These exclusive credit cards come with additional goodies like lounge access and free plane tickets, as well as hefty annual fees.

Oh, and they’re off-limits to most of us normal folks. Not only are the premium credit cards restricted to those with excellent credit, but some annual fees are pushed exorbitantly high to mark the elite status of those who pay them (exhibit A: the American Express Centurion, which has a $5,000 initiation fee plus a $2,500 annual fee.)

The calculation: Rewards + Perks + Prestige > Fees

With a rewards credit card, the annual fee vs. money back calculation is fairly straightforward. Will I spend enough money on the card that the rewards will be more than the fees? But with premium credit cards, it’s not nearly so simple.

For one thing, the base rewards rate is usually not as good. The top rewards credit cards – think AmEx Fidelity Investment Rewards – pay cash at a rate of 2% back, while others – think Chase Freedom – give 5% cash back on rotating categories. Premium cards are less generous: depending on the card, many Visa Signature cards and the AmEx Platinum flit between 1% and 1.25%, and they come with higher annual fees. And while the Capital One Venture Rewards can earn 2% back on all purchases, cash can only be redeemed at a 1% rate. Clearly, simple multiplication won’t do the trick.

The value of a premium card depends a lot on travel, and can be calculated to an extent. But the value will vary with your travel habits, which are hard to predict. Plus, there’s that additional piece: the value you personally place on convenience, security and the ego boost of having a card other people don’t, as well as a concierge to do your bidding when you can’t be bothered to do it yourself.

We’ll compare two of the more accessible premium cards, the AmEx Platinum and Capital One Venture Rewards (a Visa Signature), to two straight-up rewards cards, the Chase Freedom and Fidelity AmEx, in terms of easy-to-calculate fees and rewards as well as more subjective perks. All numbers shown are calculated and amortized over a three year period.

It should be noted that the AmEx Platinum became much more attractive recently. American Express just nixed its foreign transaction fee (previously 3%) and expanded its airport lounge access to over 600 lounges worldwide. It also now offers a credit towards Global Entry, a government program that allows travelers returning to the US to skip the living hell that is the customs line.

Step 1: The Fees

The AmEx Platinum has an annual fee of $450 while the CapOne Venture’s annual fee of $59 is waived the first year, so over three years that comes out to about $39 annually. The Freedom and Fidelity card have no annual fee. We’ll take these as our starting points.

Platinum: -$450	Venture: -$39	Freedom: $0	Fidelity: $0

 

Step 2: The Rewards

It doesn’t really matter what number we use, but let’s assume that since you’re springing for a premium credit card, you’re a high roller and you’ll be putting a boatload of money on it. For ease of calculation, let’s say it’s $100,000 a year. The AmEx base rewards rate is 1%; the other three get 2%. For the Freedom, you technically earn 5% on certain categories for one quarter, and 1% the other quarters, so we’re averaging this to 2% year-round.

Platinum: $550	Venture: $1961	Freedom: $2000	Fidelity: $2000

Now, if these were straight-up rewards cards, we could stop calculating, declare the Fidelity card a winner and call it a day. But we’ll look at the travel benefits, which make or break the value of a premium card.

Step 3: Foreign Transaction Fees

Most cards charge a fee for any purchases made overseas. The Visa network levies a 1% fee on the banks, which usually mark that up to the 3% consumers see. However, the Platinum and Venture have no foreign transaction fees, while Fidelity only passes along the 1% charge. The Freedom levies a 3% fee. So let’s assume that you spend $10,000 abroad a year (remember, we’re all high-rollers in this exercise), and subtract the F/X fees from the cards.

Platinum: $550	Venture: $1961	Freedom: $1700	Fidelity: $1900

 

Step 4: Signing Bonuses

AmEx gives out 50,000 points (or about $500) while the Venture has no signup bonus. The Freedom’s typical ongoing bonus is $100 (this changes all the time, check our cash back credit card page for the latest deal). Fidelity doesn’t offer anything as an upfront bonus. Just like the annual fees above, we’ll average these over the first three years.

Platinum: $717	Venture: $1961	Freedom: $1733	Fidelity: $1900

 

Step 5: Other Quantifiable Goodies

Now we’re getting to the minutiae. The Platinum offers a $200 refund each year for travel-related expenses like baggage fees and in-flight meals, as well as a $100 credit towards the Global Entry program (I’ll ignore this one in the calculation, since it’s small and one-time only). It also gives out a free Priority Pass membership, valued at $400 annually. Once a year, members receive a Companion Ticket that allows someone to fly with you when you book one business class ticket to a number of world destinations. Let’s value that at $1000, after subtracting taxes, surcharges, and AmEx’s $78 service charge (a conservative number, I admit, but I’m skewing really low, figuring that most users won’t actually use this).

The Venture and Freedom both offer less easily quantified benefits, including rental car insurance and roadside assistance. Most users won’t take advantage of these either, so we’ll value them at only $200 each year. Fidelity doesn’t offer either.

Platinum: $2317	Venture: $2161	Freedom: $1933	Fidelity: $1900

 

Step 6: The Intangibles

Ah, now we’re getting to the good stuff. All these cards offer some sort of discount mechanism, whether that’s additional rewards for making purchases with preferred retailers, or cheaper rates at luxury hotels. Because that’s so consumer-specific (how much do you fly on Southwest vs. British Airways?) we’ll consider that a wash. Of course, you’re probably (hopefully) far more familiar with your spending habits than we are, so check out each card’s preferred retailers to see if your loyalty will take you further.

But the intangibles, oh, the intangibles. All of the premium credit cards offer concierge service to help you book plane tickets or reservations (or, in our case, buy flowers at 4:00 on Valentine’s Day), a one-year warranty extension on purchases, roadside assistance purchase protection, rental car insurance and emergency travel assistance. The feeling of security is always nice, but not exclusive to premium credit cards.

But the dealbreaker for the premium cards depends on the value you place on the perks. Don’t travel internationally all that often? Then the Platinum’s incidentals and lounge access are worth a lot less, and you can add $100 back to the Fidelity card, and $300 back to Freedom. If you would otherwise fly economy but bought a business class ticket so you could use your AmEx companion ticket, the freebie is actually costing you money (though it is nice). You probably (hopefully) will never need to use most of the Escape’s and Venture’s perks, like travel or lost baggage insurance.

So, should you get a premium credit card or not?

After all this analysis, and all these assumptions, what do we get? The all too familiar answer: “It depends”. Did you expect anything less? We can distill it down to a couple rules of thumb, but in the end, it’ll depend on how often you fly. The real value of premium credit cards is in bonus miles, and in services and perks that make traveling more bearable. The verdict on premium credit cards: if you travel far and spend freely, they’re worth it. If you don’t, they’re not.

The Premium Selection:

The Platinum Card® from American Express
	25,000 Membership Rewards® points when you spend $2,000 during your first three months of Card membership. Global Travel Benefits: Access over 600 lounges worldwide with Priority Pass(TM) Select, no foreign transaction fees, skip U.S. customs lines with Global Entry. Enroll and select an airline to receive up to $200 annually in statement credits for incidental fees such as checked bags, in-flight refreshments, and change fees.* Receive a companion ticket for discounted travel when you purchase a qualifying First- or Business-Class international ticket. Additional charges/taxes apply. 24/7 Platinum Card® Concierge service for assistance with reservations, travel, gifts, and more FINE HOTELS & RESORTS Program: exclusive upgrades and amenities at over 700 boutique, resort, and luxury hotels worldwide. Use Membership Rewards Pay with Points for part or all of your travel and get 20% of those points back every time.
Annual Fee Signing Promo APR, variable* Intro APR Promotions $450 25,000 American Express Membership Rewards Bonus after spending $2,000 - in the first 3 months. N/A Purchase: None Bal Trans: None

Capital One® Venture℠ Rewards Credit Card
	Money(R) Magazine's "Most Rewarding Card if you crave free airline flights" 2 miles per dollar on every purchase, every day Earn 10,000 bonus miles, equal to $100 in travel Redeem your miles for any travel expense No limit on the miles you can earn and miles won't expire Fly free on any airline, any time with no blackout dates No foreign transaction fees $0 intro annual fee for the first year; $59 after that
Annual Fee Signing Promo APR, variable* Intro APR Promotions $0 intro for first year; $59 after that 10,000 Capital One No Hassle Miles Bonus after spending $1,000 - in the first 90 days Min APR: 13.9%(V) Max APR: 20.9%(V) Default APR: 29.4%(V) Cash Adv: 24.9%(V) Purchase: None Bal Trans: None