Premium credit cards offer an array of exclusive rewards and perks, and owning one can be a powerful status symbol. However, to get one, you will need to meet strict qualifying criteria and be prepared to pay a chunky annual fee.
Here, we look at how they work and who they are most suitable for.
How do premium credit cards work?
Premium credit cards work in a similar way to standard credit cards – you borrow on the card and then repay your lender in monthly instalments. Where they differ, however, is the wide range of perks and benefits on offer, and many come with high credit limits too.
The types of rewards you may be able to enjoy include :
- worldwide family travel insurance
- access to airport lounges worldwide
- reward or loyalty points, including air miles
- concierge or personal assistant services to help you book holidays, dinner reservations, or even buy gifts
- vehicle breakdown cover
- advanced tickets for events
To qualify for a premium credit card you’ll need to meet strict criteria. For a start, you’ll need to have an excellent credit rating. You’ll also need a high annual salary, often over £50,000.
Even then, you won’t be able to apply for all premium credit cards – some are so exclusive you’ll need an invitation from the provider itself.
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What are the advantages?
There are several advantages to using a premium credit card, including :
- they can be good value for money if you make full use of all the benefits
- credit limits are much higher than for standard cards, so you can use your card to buy expensive items and services
- perks are often geared towards travel, which makes them ideal for frequent travellers
What are the disadvantages?
Of course, there are several disadvantages too :
- annual fees are expensive, often £200 or more
- interest rates are high so if you can’t afford to clear your balance each month, it will rapidly become an expensive way to borrow
- high credit limits can encourage you to spend more than you can afford to pay back
- you may not make full use of the benefits included
- you could end up paying for perks such as travel insurance twice if you already have cover elsewhere
- you’ll need a high annual salary and excellent credit rating to get accepted
Is a premium credit card right for you?
If you are considering a premium credit card, it’s important to choose the one you are most likely to benefit from. If you don’t think you’ll make full use of the perks on offer, or the amount you’ll save will not cover the annual fee, a premium credit card is unlikely to be the right choice for you.
You’ll also need to consider whether you meet the qualifying criteria. Is your salary high enough? Is your credit score good enough? Note that you can check your credit score for free through various online services.
If you decide to go ahead and apply for a premium credit card, make sure you can afford to clear your balance each month. Premium credit cards rarely offer interest-free deals, so don’t be tempted to spend more than you can afford to pay back, on time, each month.
If you are unable to pay off your balance in full, the amount of interest you pay will far outweigh any benefits. Plus, if you miss a payment altogether you risk damaging your credit score and you could also lose the card perks.
Finally, make sure you check the terms and conditions of benefits such as travel insurance – you may find certain medical conditions are excluded or the cover isn’t as comprehensive as it would be if you applied for separate cover elsewhere.
Are there any alternatives?
If you’re not sure a premium credit card is right for you, one of the options below may be more suitable :
Reward credit cards
If you’re a keen traveller, some reward credit cards allow you to earn airmiles that can later be redeemed on flights and holidays. Other reward credit cards allow you to earn loyalty points in certain retailers which can then be traded in for vouchers or discounts in the same stores.
Be aware, however, that many reward cards come with high interest rates so it’s important to pay off your balance in full each month.
Cashback credit cards
With a cashback credit card, you can earn back a percentage of the amount you spend, and this is then paid into your account each month or year. You may find cashback rates are tiered, depending on the amount you spend.
Again, interest rates are often high so it’s best to pay off your balance in full each month, and you’ll also need to watch out for annual fees.
Comparing premium credit cards
Assuming that a premium credit card is the right choice for you (as outlined above), the next step is to choose one provider over another. Remember, rather than focusing on interest rates and APR, with premium plastic the main benefits come through the associated rewards on offer.
Would you be better off receiving travel benefits such as airmiles, worldwide travel cover, access to exclusive airport lounges, and other concierge services? Or would you benefit more from, say, home-based or emergency breakdown cover, or shopping-based rewards schemes?
Before choosing a provider, think carefully about how new benefits will overlap with existing entitlements and cover that you already have in place. For example, there’s little point duplicating insurance in one area while leaving a gap elsewhere.
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