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Say you have excellent credit and a high income. You spend a lot of money on credit cards every month. It’d be no wonder that banks would really want your business. And recent activity in the credit card industry shows that competition for high-net-worth individuals is heating up considerably.
Chase, the second-largest credit card issuer in the U.S. behind Citi, just launched a premium card targeting the most affluent travelers. The Chase Sapphire Reserve® comes with top-tier perks and rewards, including hundreds of dollars in annual credits for travel expenses and complimentary access to airport lounges. It doesn’t come cheap, though: There’s a $550 annual fee.Visa Infinite platform, which provides benefits and services a level up from those available on Visa Signature, previously the highest-level Visa offered in the U.S. Visa Infinite has been available abroad but was only recently introduced in this country, another sign of expansion in the high-end market. A handful of other cards have been introduced on the platform so far.
The example set by American Express
When you think of exclusive credit cards, you may still think of the venerable American Express® Gold Card, the original version of which hit the market 50 years ago.
“American Express used to dominate the high-end market with its metal-tiered credit cards,” says Sean McQuay, NerdWallet’s credit card expert. The cards were well-known for their perks and lack of spending limits. (They were charge cards rather than credit cards, meaning the balance was due in full every month.) McQuay says other issuers have mostly stayed away from AmEx territory, choosing instead to compete for business by offering low interest rates and long 0% APR balance transfer periods.
“Since the recession, many major U.S. banks have become more interested in pursuing the upper end of the market,” McQuay says.
Rewards vs. exclusive benefits
Chase introduced the Chase Sapphire Preferred® Card in 2009. The Capital One® Venture® Rewards Credit Card showed up in 2010, and the Citi® Double Cash Card – 18 month BT offer launched in 2014. These cards are all designed for people with good to excellent credit who want to maximize their rewards — but they’re not necessarily reserved for people who habitually fly first class. That’s reflected in their annual fees. The Chase Sapphire Preferred® Card charges $95; the Capital One card charges $95. The Citi card is at $0.
Meanwhile, the Citi Prestige® Card, which came out in 2010, directly competes with The Platinum Card® from American Express for the premium market. Like the AmEx, it offers credits for airline expenses, lounge access and reimbursement for expedited screening programs like TSA PreCheck. These elite cards are mostly defined by their perks — the goodies you get for carrying them — rather than the rewards you get for using them.
“For a long time, premium cards focused on high-net-worth individuals, who have traditionally cared less about optimizing 1% of their credit card spending and more about exclusive perks like lounge access and concierge services,” McQuay says. “However, credit card issuers have recently begun experimenting with bringing premium cards to a wider audience, maintaining those perks and increasing the competitiveness of their rewards rates.”
In some ways, the new Chase Sapphire Reserve® combines the best of the elite cards and the more accessible rewards cards. Its perks and annual fee are comparable to those of The Platinum Card® from American Express and the Citi Prestige® Card, while its rewards can be higher than those of the Capital One® Venture® Rewards Credit Card or the Citi® Double Cash Card – 18 month BT offer.
The Chase Sapphire Reserve® gives users 3 points per $1 spent on dining and travel, and 1 point per dollar on everything else. Points are worth 1.5 cents apiece when redeemed for travel, giving this card an effective 4.5% rewards rate on travel and dining purchases and 1.5% elsewhere. It also offers one of the most valuable sign-up bonuses available anywhere. Chase describes it this way: Earn 50K bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $750 toward travel when you redeem through Chase Ultimate Rewards® .
Are you a good candidate for a premium credit card?
Even if you have great credit and can afford the steep annual fees, these cards may not be a good deal for you. It all comes down to how you travel. The Platinum Card® from American Express, the Citi Prestige® Card and the Chase Sapphire Reserve® all offer hundreds of dollars in annual credits for certain travel expenses, which takes the sting out of their annual fees. But you do need to spend a considerable amount on travel to make these cards worthwhile.
For example, with the Chase Sapphire Reserve®, even after factoring in the $300 in travel credits you receive each year, you’d still need to spend $3,333 annually on travel and dining combined to cover the cost of carrying the card. Other cards require a similar level of spending before cardholders will break even, although sign-up bonuses can sometimes wipe out the annual fee for one or more years.
The perks have value, too, of course. Free access to airport lounges can be worth hundreds or even thousands of dollars, depending on how often you fly.
Even so, if the higher annual fees make you nervous, you may be happier sticking with a travel rewards credit card that doesn’t cater to the champagne-and-caviar set. You may find that a solid travel card like the Chase Sapphire Preferred® Card or the Capital One® Venture® Rewards Credit Card is perfectly adequate for your needs.
But if you’re constantly on the road and looking for a way to ease the grind, you might as well take advantage of the fact that credit card issuers are competing for your business and apply for a premium credit card. The latest one to hit the market might be a good place to start looking.
“The Chase Sapphire Reserve® is a premium card by any measure, but also one that doesn’t sacrifice rewards for perks,” McQuay says. “This makes it, in my opinion, the best premium card on the market.”