The Premium Credit Card Craze - Running with Miles
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The Premium Credit Card Craze

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Written by Dustin

We are seeing more and more credit cards with annual fees that align with premium credit cards, but are these cards really a premium credit card?

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Banks have really been emphasizing “premium” credit cards. It seems everywhere we are seeing more credit cards with higher annual fees. Should banks stop this premium card craze and properly categorize their credit cards?

The Premium Credit Card Craze

This really comes back to the Chase Sapphire Reserve and the success Chase received from this credit card. Other banks are trying to capture that magic, but they aren’t even remotely close to nailing it.

Sapphire Reserve Success:

When the Chase Sapphire Reserve was launched, it had all the right ingredients to really take command of the market.

The sign up bonus was phenomenal, hard to argue with 100,000 Ultimate Reward points. If it weren’t for the 5/24 rule, I definitely would have jumped on that bandwagon.

The benefits were solid. They have now been reduced, but they still offers great benefits for people who love to travel.

Chase transfer partners are very valuable and the ability to pool your Chase points makes earning points to easy.

I think the one place that really makes it stand out was the slightly better redemption options. Ultimate Rewards are known to be one of (if not the) top flexible currency on the market. Chase decided to make one option just slightly better than the other Chase cards.

You could redeem at 1.5 cents per point, instead of 1.25 cents per point. That little extra really gave people a solid option to redeem their points without transferring points.

Citi tried this for a bit with American Airlines, but eventually cut that benefit to where the Prestige and the Premier both redeem at 1.25 cents per point through their portal.

American Express had a challenger and I was actually excited for, but that quickly changed. The Business Platinum offered a 50% rebate on your points redeemed through their portal. That benefit must have been too rich for American Express, because they cut that benefit to 35% not even a year after introducing the benefit.

Faux Premium Credit Cards:

Since the Reserve was released, more $450+ credit cards are being released. Except banks are doing a really bad job justifying that high annual fee.

It seems many banks think there is a common formula that will entice people to apply for their cards.

Banks believe you need a decent bonus, they MUST have a travel/airline credit, a few benefits, and a few categories that earn a little more.

What banks don’t understand, a bonus is important but some people can look beyond a mediocre bonus. The travel/airline credit, the more restrictive you make it, the less appealing it is.

Also, I personally don’t view travel credits as benefits. I view these credits as a prepayment for your travels, but I don’t think they really reduce your annual fee. You may disagree with me and that is okay. 🙂

If you want this card to be in the front of my wallet, the earning rates need to be pretty good. Having your rewards earn 2% or 2x points at most isn’t worth it for a $450 card.

I think the part where these cards really start to fall apart is the redemption options. The more options we have the better. Unfortunately, these airline/hotel specific don’t have nearly as many options for redemptions. Even the flexible currency cards fail here as well. Look at the Citi Prestige and Citi Thank You Premier, both redeem at 1.25 cents and frankly the Thank You Premier has better bonus categories.

As for American Express, unless you have their Business Platinum there is no extra benefit for redemptions. This section alone is where banks/companies need to step up to really challenge the Sapphire Reserve.

The benefit of lounge access is no longer a true benefit. That is due to the fact everyone has it and now all the lounges are overcrowded. So adding this is really useless, because odds are someone already has it.

Think TSA Precheck/Global Entry is a benefit? Try again! This is offered by many credit cards now and if everyone has TSA Precheck/Global Entry, is it really a benefit?

Looking at Recent Premium Cards:

Let’s take a look at some premium credit cards and why or why not they fall short.

Korean Skypass Visa:

This comes with a stupid $450 fee, a bad bonus, bonus categories that are pretty bad, a restrictive travel credit, and other fluff to make it look appealing

US Bank laid an absolute DUD in this one. This doesn’t even compete with the a card like the Sapphire Preferred since Ultimate Rewards can transfer to Korean Airlines.

Hilton Aspire:

This one is definitely a decent card, but not a game changer.

For a bonus, it catches your eye at 100,000 Hilton Points. This isn’t really with as much as it looks, but depending on how you redeem your points, this could be worth a few free nights. You can’t transfer these to airlines, well not at a rate worth mentioning.

Paying $450 for the card will get you “Complimentary Diamond Status.” If you stay at Hiltons frequently, this is the easiest way to “earn” Hilton Diamond Status. Although it does cheapen the benefit for the true road warriors.

Travel credits? You’re in luck! You’ll get $250 credit to participating Hilton Resorts and a $250 Airline credit. American Express is more restrictive than Chase or Citi when it comes to their airline credits. This would be good for someone who plans to spend money anyways on airfare and Hilton Resorts.

Earning rate is good for paid Hilton stays, good for a few bonus categories, and not really enticing for non bonus spend.

SPG Luxury:

This will be the newest Luxury card on the market in shortly. I again, think this card falls short to really competing with flexible currency premium travel cards.

The bonus is still to be determined, but I would bet this will be 125,000 points. While that sounds good, this is about 50,000 airline miles. Or depending on how you spend your Marriott points a few nights to a lot of nights.

Status? This is a joke as Marriott Gold really isn’t worth the effort starting August 1st. Especially if you consider the Hilton Aspire gives you Diamond Status.

Of course it will come with a $300 statement credit for stays at Marriott. This is restrictive since it will only be good at Marriott hotels.

The earning rate is mediocre at best. Especially since you will be able to transfer Ultimate Rewards and Membership Reward points. This means there are better options for earning rates if you really want to earn Marriott points.

Thoughts:

Many banks understandably want to recapture the Chase Sapphire Reserve magic. Unfortunately, I think most banks are afraid of the financial implications of improving redemption benefits. But, most of these credit cards are decent credit cards dressed up to look like premium credit cards.

If banks really want to take over the premium they know what they need to do. Doing so, will come at a heft price though. That is a decision they will need to make.

What are your thoughts on the premium travel card market?

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About the author

Dustin

After completing 6 years of pharmacy school, I finally had the time to travel. I started investigating ways to travel for less and when I redeemed my first award flight for my honeymoon, I knew I was hooked! Fast forward a couple of years and places I had never dreamed of visiting like Budapest, Honolulu, Bermuda and many other places where all within my reach, and for little to no money out of my pocket. Now, I have collected well over a million points and miles, and try to help people travel for less on their wallet.

7 Comments

  • I found the evaluation of both aspire is a bit inaccurate since you didnt take the free weekend night certificate into account. Same goes to spg luxury but I think it doesn’t give free night certificate first year so its a bit different

    • Hey Kevyx72,

      Happy 4th!

      I personally find the SPG Luxury card unappealing. Mediocre status, cards with lower AF have same earning rates (except for the 3x which is meh), only thing better is the 50k certificate vs the other Marriott/SPG card. Overpriced and underwhelming.

      I think the Aspire is the better card when compared to the SPG Luxury card. You are really paying the $450 for diamond status, which is worth it if you value status and a free night cert.

      Thanks for reading! I appreciate it!
      Dustin

  • I agree that there are a lot of new “premium” cards being marketed that fall short. However, I do think you are selling the Aspire short. It might not be for everyone, but if you want to avoid the hassle and expense of achieving top tier status at a major chain, and can make use of the resort credit, then it’s a great deal.

    It’s an especially good deal if you travel internationally often, as Diamond status is not significantly diluted by a US only card, and I find that the value of Diamond in international Hilton/Conrads is much better (more upgrades, better breakfast, more and better lounges, etc.)

    For me, this card and my Citi Prestige @$350 AF are the only premium cards I will pay the AF for.

  • Dustin,

    You make some good points in this article but you missed the single most compelling argument for Chase Ultimate Rewards over AMEX Membership Rewards points – Chase Ultimate Rewards points have a minimum cash value of one cent. AMEX Membership Rewards points redemption values vary with the type of redemption and many of those values are less than one cent. This reduces the return after the annual fee significantly.

    • You can easily get 1.25 cpp for MR by signing up for the Schwab Plat. That is my plan after I cycle through all the other flavors.

      • WR,

        That sounded good to me too until I calculated the net return I would deposit into my Schwab account after net annual fees and all the AMEX breakage opportunities like Uber and airline incidental credits using my typical annual spending. I assumed I was also using the AMEX Everyday Preferred card (accounted for that annual fee too) to maximize AMEX Membership Reward points and that I received the $200 Schwab credit on the AMEX Platinum card. Without a significant amount of annual airline spend, I would put more money into my Schwab account using cash back options. Thus, you would have to place a lot of value on the AMEX Platinum benefits for travel. Good luck with it. My primary travel card is Chase Sapphire Reserve which pays for itself and nets a 2% net return using the $300 travel credit and with a minimum $6000 travel/dining spend redeemed using the Chase travel portal.

        • I’m not suggesting keeping the Schwab Plat indefinitely, just get the signup bonus, and transfer however many points you want to Schwab, keep for a year and then cancel.

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