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Play your cards right

Published: 01/03/2006 - Filed under: Archive » 2006 » March 2006 » Special reports » Features » Special Reports »

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Premium credit cards and charge cards offer a simple proposition. Satisfy their criteria, and they will offer you a raft of benefits – at a price. The benefits often include annual travel insurance and concierge services, and may also throw in business lounge passes at airports and even a reward scheme for the money you spend – all potentially things a regular business traveller might value. Yet when we conducted a survey on businesstraveller.com, you seem to be split over whether the benefits justify the fees. In fact, just over half of you (51 per cent) believe the fees aren't justified. Yet these cards just keep on coming. The most recent is Morgan Stanley's i24 card, launched in November 2005. It promises "genuine benefits to a higher income audience". Patrick Muir, marketing director for Morgan Stanley Consumer Banking, is keen to emphasise that customers are more interested in functional features than flashy symbols of success. "We are targeting our card at a group of people who have reached a certain level of financial comfort through making sound decisions," he says. "It isn't designed to impress your mates – any claims that simply showing a certain type of card will get you a table at The Ivy on a Saturday night are just not true."

To this end, the i24 card includes features like commission-free use abroad (the only premium card to do so) and an uncapped 1 per cent cash back on all purchases. Customers spending £27,500 on their card per annum would therefore claw back the card's annual fee of £275 even before taking into account savings on purchases made on foreign soil.

"To be honest, we didn't expect cash back to come out quite as strongly in our research as it did." says Muir. "When you haven't got much money, cash back is really valuable as you receive a physical cheque. But after a customer reaches a certain level of earnings, it becomes more like a badge of intelligence – the cardholder takes pride in knowing they are getting their purchases 1 per cent cheaper than everyone else."

Other providers argue that it is the exclusive nature of a premium card that attracts business travellers to their product. Coutts was keen to make it known that its World Card face was created by British designer Oswald Boateng (apparently the purple colour originates from a Roman dye that in its time was more expensive pound for pound than gold). Mark Till, marketing director of Barclays Premier, also believes that the Barclays Premier Infinite card has the "wow" factor: "Customers like to feel they are part of the elite, and a premium card does this, as opposed to a card which customers do not have to qualify for. Several people have signed up for Barclays Infinite just by seeing it on my desk and asking what type of card it was."

Barclays' card costs £150 per annum, the least expensive of the premium cards by some distance, although the lack of reward scheme (something Barclays is currently looking into) has to be taken into consideration when weighing up value for money.

Coutts and Natwest both offer loyalty miles at one mile for every £15 spent (in the case of Coutts this rises to one mile for every £12 spent over £5,000 in any one month), while American Express includes its rewards programme as standard.

Of course, if loyalty miles are the clincher, there are far better deals out there. American Express offers a series of British Airways credit cards, all offering enhanced loyalty miles on purchases made. The basic BA Amex card, which has no annual fee, rewards users with one mile for every £1 spent, some 15 times better than the Barclays and Coutts cards. Its Premium Plus offering rises to 1.5 miles for every £1 spent (although it does come with a £120 annual fee). The other bonus with these cards is that they have a minimum income requirement of just £12,000 – considerably lower than the majority of premium cards.

Indeed, salary is a major consideration when applying for premium charge and credit cards. American Express requires an annual salary of £30,000 for its Platinum Charge Card (the Centurion Card is available "by invitation only"), while Natwest and Morgan Stanley ask that clients earn a minimum of £70,000 and £75,000 respectively, although Patrick Muir says applications are considered on a case-by-case basis. Barclays and Coutts, on the other hand, require applicants to be existing bank account holders. Alison Langton, head of banking products at Coutts, says that its card is aimed at high earners and those rising quickly through their career scale.

"We have no hard and fast rules for banking with Coutts, but in general we are looking for customers with investable assets of around £500,000."

The Coutts card is also one of the more expensive premium offerings at £350 per annum, although uniquely this is refunded to customers making over £50,000 of purchases on their card in any one year.

Assuming you meet the requirements, the next decision is whether to opt for a credit or charge card. Charge cardholders who do not clear the balance of their card every month face hefty penalties, but the advantage is that they tend not have a pre-set credit limit. The Coutts and American Express premium offerings are both charge cards (although both offer other credit cards within their range), while Barclays, Natwest and Morgan Stanley are credit cards. In addition, applicants should consider whether they prefer a Visa (Barclays) or Mastercard (Natwest, Morgan Stanley and Coutts).

Other than loyalty miles, the cards offer a range of services useful to the frequent flyer, none more so than the executive lounge Priority Pass. Be sure to check the small print to establish what grade it is (see box). Prestige Level allows unlimited free access for the principal and secondary cardholders, plus guests at £15 each. Purchasing this level separately would costs £259 per year. Barclays only offers the Standard Level pass, worth £69 per year, but you pay £15 per visit (of course, you have to bear in mind that Barclays' card costs less in the first place).

Travel insurance is another benefit provided for premium customers, and in general this is extended to the family of the principal cardholders, and additional cardholders. The packages seem fairly comprehensive, with winter sports protection included with most providers, but again customers need to consider if it is a service they actually require, or just an added bonus. Family multi-trip insurance packages start from around £100 direct from the supplier – considerably less than the annual cost of the majority of the premium cards on offer.

While Priority Passes and travel insurance are offered across the board, some cards have additional benefits. American Express, for example, allows its Platinum customers to use Eurostar's executive lounges, irrelevant of which class they travel in, and for Centurion cardholders, enhanced privileges such as Starwood Preferred Guest Platinum level come as standard. Applicants should also consider how many additional cardholders are allowed, and what benefits they enjoy – Barclays permits up to eight secondary cardholders, all of whom receive a Priority Pass and travel insurance cover.

While most of the services included with these premium cards are quantifiable, the much heralded concierge services are less so. Advertised as a key offering with all of the cards, the service offers clients help with everything from booking restaurants and hotels worldwide, to obtaining upgrades on car hire and providing information on visa and vaccination requirements. American Express uses its own in-house concierge service, while the others contract out to dedicated firms such as Ten UK (we will be examining these and other lifestyle services in more detail later in the year).

Alison Langton believes that the concierge service is of particular use to entrepreneurs in the early stages of their careers. "We have found that a large number of business entrepreneurs use our [concierge] services as they do not have the infrastructure of a large company behind them. In their early days they are able to use us to book flights, arrange car hire and so on – all things they would otherwise have to spend time doing themselves."

Langton also points out that the established agreements and increased buying power of these concierge services allows them to source better rates for their clients. Mark Till echoes this point, and believes it offers excellent value for money, allowing customers to access a wide range of deals that they would otherwise not be privy to.

"The service provided by Ten UK costs at least £50 per month if bought directly through them – we provide it free of charge to all cardholders," says Till. "The service really is the full monty, helping clients to secure upgrades on everything from car rentals to hotels."

Customers do not pay a commission for using the service, and the costs of any products or services they buy are simply billed to them as any credit card purchase would be. Most of the providers also allow busy cardholders to nominate a PA to make calls to the concierge services on their behalf, and previous requests are recorded to create a client preference profile.

So do these cards offer value for money? As with many "bundled" product offerings, the answer depends entirely on how much use the cardholder gets out of each service. If you would be likely to purchase a Priority Pass and travel insurance as a matter of course, and are the sort of person that would make good use of additional cardholders, concierge services and loyalty programmes, then there is every chance you could benefit from one of the premium cards on the market. If, however, you simply want to impress your friends and colleagues, there are surely cheaper and more effective ways of doing so.

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