Gold Cards and Platinum Cards

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QUESTION: “What is the difference between a Green Card and a Gold Card?”

ANSWER: “The difference is that the Green Card is green and the Gold Card is gold, and if you don’t understand that, then you don’t understand this company.”

— attributed to Aldo Papone, chairman of American Express Travel-Related Services Division

Percent of millionaires with an American Express Platinum Card: 6.2.

Percent of millionaires with a Sears credit card: 43.

SOURCE: Smart Money magazine

There’s been a big change in the marketing of Technicolor credit cards in the last few years. Originally, gold cards were held up as some thing special for the elite (read well-to-do), and they were more difficult to get, with credit limits of at least $5,000 and special services not available on the tawdry regular credit card level. But that’s all different now. Gold cards are available to almost anyone; credit limits of $5,000 or much more are readily available on regular, non-gold cards. And the special features on gold cards have been cut back in many cases and are now often just as available on the regular cards. At present the card companies are battling for the name “platinum card,” which they think will open up new vistas of marketing and exploitation. Some companies are even working on the next level, the “titanium card.”

We’ve all seen those ads for metallic-colored plastic cards: gold, platinum, silver, and whatever. The ads promise that if you carry one of these super-prestige pieces of plastic that headwaiters in fancy French restaurants and members of the opposite sex will collapse gasping at your feet just at the sight of that tiny piece of plastic. Seems rather unlikely, doesn’t it?

But the card folks have got to have some way to justify the extra $30 to $300 and more that many will sock you for if you can be convinced that you must have one of their specially colored goodies. They have to sell you something you can’t see, hear, smell, touch, or feel — like nonexistent prestige. The vaunted advantages of the special cards, in general, don’t really exist. Indeed, the advantages of the metallic cards are so elusive today that most of the companies issuing them have dropped their annual fees and hope to make their money in other ways.

In fact, the high gold card credit limit can really be a trap. Why pay 20 percent interest on $5,000 or $10,000 of charges when you can get a regular loan for half that rate? It’s silly. But people do it.

Consider that cash advances average four times larger on goldie Visa and MasterCard accounts than on regular bank card accounts. The goldie folks don’t usually get any special break. They pay the same hefty charges for cash advances that the normal bank card user gets stuck for.

Finally, a gold card may make you more likely to be a victim of fraud. Since a gold Visa or MasterCard generally has a credit limit of at least $5,000, many organized card fraud rings look for gold cards to use in scams because the higher credit limits make it more profitable.

What do you really get from the “prestige” cards? Not much. And mostly not enough to justify any extra charge.

But there are occasionally some extra goodies with a metallic card:

Rental-Car insurance . Some card companies offer insurance to cover the collision damage waiver that car rental companies now use to rip off their customers. This policy, which covers you if you charge the car rental on many gold cards, is a valuable benefit, one that does not cost you the ten or fifteen or twenty dollars a day the rent-a-car folks want for much the same coverage. But many regular, non-gold cards offer the same coverage today. You have to read the papers the card company sends about insurance coverage or call the company and ask to find out. Anyway, the best deal around on such coverage is, in my opinion, that offered by the Diners (ungold) card. Diners card coverage is primary, not secondary, which means that if, Heaven forbid, you have a crash in a rental car, Diners will pay the rental company for the damage without first making you go to your own insurer and make a claim. Most other companies cover you only for what your insurer won’t pay. So if you have personal auto insurance, it probably also covers you for most of the damage you might do to a rental car, but the card company (if it’s not Diners) will probably insist that you make a claim with your own insurance company and will cover only what your company won’t pay.

Note that there are changes afoot here. MasterCard and Visa have cut back on their coverage on many non-gold cards and American Express has eliminated coverage for some countries where it says the claims have been too expensive, such as Italy , Israel , Ireland , and Jamaica . Call the bank that issues a card you are thinking about using to rent a car abroad and ask what the current coverage is. Ask that a written statement of the coverage be sent to you and put it in your file.

Lower interest rates . Some gold bank cards do carry an interest rate lower than that of the normal card from the same issuer. This could be worthwhile if you carry a large balance on your card and if you are unable to find a normal card with an even lower interest rate, which shouldn’t be to hard too do today.

Referral s. The gold bank cards, Diners, and Amex provide free referrals for medical and legal services most places in the world. A free referral doesn’t mean you won’t get charged by the doctor or whom ever you’re referred to.

Our advice? Ignore the card’s color. Judge a card by its interest, fees, and services. The sole exception, the American Express Platinum Card, comes loaded with extras. You can get special opera tickets and two- for-one deals on business-class flights to Europe and on the supersonic Concorde. If this sort of thing is important to you and you don’t mind the current $300 (!) annual fee, why then, go ahead and apply. (American Express claims you have to be invited to apply for the card, but we suspect that if you call Amex customer service and ask, you may well get an application.)

Interestingly, American Express, having lost a legal battle for the exclusive use of the term Gold Card, is now fighting with several banks over the right to use of Platinum Card. At least two banks decided to try to move up-market with platinum-colored cards with up to $100,000 credit limits (Gosh, Ma, I got to have that ermine-tipped solid-diamond cape right now today—and it’s only $99,999.99!). The banks don’t offer the same level of special services that American Express does, but they don’t charge a $300 annual fee either; in fact they issue their platinum cards at no annual fee. And I’ve heard from holders of American Express Platinum Cards that Amexco has cut back a bit on its services to them—for example, eliminating a travel service that gave holders of that sacred card certain travel services not avail able to those worthy of merely moderate credit.

Scam “Gold” Cards. A popular scam is marketing phony “gold” cards good for buying only overpriced items from only one catalog. These are usually offered to folks who are in some sort of credit difficulties. Often tied in with some purported membership in a special buyers’ club, the junk mail package tries very hard to look like it is offering you a Visa or MasterCard gold card. It may even have the Visa and MasterCard logos prominently displayed on the envelope and order blank. But that doesn’t mean that it’s a Visa or MasterCard you can use almost anywhere to buy almost anything. Instead, it may mean only that you can use a Visa or MasterCard to pay the exorbitant annual fee that the fake gold card company wants to sell you. The typical scam indicates that signing up for the fake gold card will somehow help with your credit problem, but it won’t..

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Wednesday, December 17, 2008 20:49