Premium Credit Cards - Benefits, Drawbacks, and Comparison

Premium credit cards offer a range of exclusive benefits that go beyond regular cards. These cards are designed for high-income individuals who value luxury and convenience. However, they come with high fees and strict eligibility criteria. The premium credit card benefits come in handy on multiple occasions. In Several sectors, such as shopping, aviation, dining, etc, these cards put you on a beneficial stage. This guide will explain the perks, costs, and best practices for using premium credit cards, helping you decide if they’re right for you.

Advantages Premium Credit Cards

Here are some of the key premium credit card benefits:

• Concierge Services: Premium credit cards often give 24/7 concierge services, assisting with travel bookings, restaurant reservations, and event access.
• Airport Lounge Access: The premium credit cardholder gets complimentary access to exclusive airport lounges domestically, internationally, and sometimes both.
• Travel Insurance: Worldwide travel insurance is frequently included in these cards. It covers aspects like lost luggage, trip cancellations, and medical emergencies.
• Higher Credit Limits: Premium cards offer significantly higher credit limits than standard ones.
• Rewards and Cashback: Cardholders earn generous reward points on spending. These points are often redeemable for travel, luxury goods, or cashback.
• Exclusive Event Access: This includes Invitations to private events, such as concerts, dining experiences, or VIP shopping days.
• Personal Assistance: Some premium credit cards provide personal shoppers or assistants for luxury purchases or rare items.
• Hotel and Dining Perks: Discounts on luxury hotels, free nights, upgrades, and special dining offers are common perks included in premium credit card benefits.
• Golf Privileges: Most cardholders get complimentary access to golf courses. And sometimes, golf lessons are also included.
• Additional Insurance Coverage: Some premium credit cards offer extra insurance coverage like car breakdown cover, home emergency cover, and purchase protection.

High Fees and Charges Associated with Premium Credit Cards

In India, premium credit cards often come with high fees, which can be significant depending on the card’s benefits. Here’s a detailed overview of these fees for better understanding:

Annual Fees

Premium credit cards in India generally charge a yearly fee ranging from ₹5,000 to ₹50,000. The higher the fee, the more exclusive the benefit. These exclusive benefits include airport lounge access, travel insurance, and concierge services. However, it’s only worthwhile if the cardholder actually uses these benefits.

Interest Rates

Premium cards have high interest rates, often exceeding 35% annually. This rate is high compared to regular credit cards, making it critical for cardholders to clear their balance each month. Failure to do so can result in hefty interest charges, overshadowing any benefits gained.

Foreign Transaction Fees

Banks usually levy foreign currency transaction fees ranging from 2% to 3.5% when using a premium credit card for international transactions. Given the rise in global travel, this fee can add up quickly for those who don’t opt for a card, which offers a lower overseas spending fee.

Late Payment Penalties

Premium credit cards impose steep late payment fees ranging from ₹1,000 to ₹2,500 or more, depending on the outstanding balance. These charges can impact individuals who don’t manage their payments effectively.

Cash Advance Fees

Withdrawing cash using a premium card incurs a fee of around 2.5% to 3% of the amount withdrawn and high interest rates starting from the day of withdrawal.

Over-Limit Fees

If cardholders exceed their credit limit, over-limit fees, typically around 2.5% of the exceeded amount, can be imposed. Therefore, it is important to track usage closely.

Premium Credit Card’s Exclusive Features and Rewards

Premium credit cards in India often have exclusive features and rewards designed for high-net-worth individuals. Here are some of the most notable ones:

• Luxury Travel Benefits: These cards often provide exclusive offers such as free nights, upgrades, and discounts at premium hotels and resorts globally.
• High Reward Points: Premium credit cards offer high rewards for every rupee spent, particularly in categories like travel, dining, and luxury retail. These points can be redeemed for flights, hotels, or luxury items.
• Cashback Offers: Many cards include cashback on specific categories such as fuel, dining, and grocery purchases, which can provide significant savings over time.
• Golf Privileges: Complimentary golf rounds and lessons at prestigious golf courses are commonly offered to premium cardholders.
• Access to Exclusive Events: To enhance the customer’s social standing, invitations to high-end events like private concerts, VIP experiences, fashion shows, and celebrity meet-and-greets are provided.
• Bespoke Services: Some cards offer personal shopping services, private jet access, and luxury chauffeur services, catering to the unique needs of high-profile clients.
• Low Foreign Transaction Fees: Premium cards often offer lower or waived foreign currency transaction fees, which are ideal for frequent travellers.

Drawbacks of Premium Credit Cards

While premium credit cards offer many exclusive features, there are also some significant drawbacks of premium cards to consider:

• High Annual Fees and Interest Rates: Premium credit cards have hefty annual fees. If you don’t fully utilise the offered perks, these fees can outweigh any benefits gained. The interest rates on unpaid balances can be steep, typically exceeding 35% per annum.
• Stringent Eligibility Criteria: These cards are generally available only to individuals with high incomes and excellent credit scores. This limits access to a select few and excludes many who may not meet these stringent criteria.
• Foreign Transaction Fees: Although some premium credit cards offer lower fees in some cases, they still charge foreign currency transaction fees of 2% to 3.5%. These fees can add up for frequent international travellers.
• Limited Accessibility of Perks: Some rewards, like concierge services or luxury travel perks, may not be relevant or easily accessible for everyone. This makes the card less valuable for those who don’t frequently travel or engage in high-end activities.
• Overspending Temptation: With high credit limits and attractive rewards, cardholders may be tempted to spend more than they can afford, leading to potential debt accumulation.
• Rewards Expiry: In some cases, reward points have expiry dates, and if not redeemed within a specific period, the points can be lost, reducing the overall benefit.
• Complicated Redemption Processes: Redeeming reward points can sometimes be complex or restrictive, with limitations on where and how the points can be used.
• Over-Reliance on Credit: The easy access to large amounts of credit can encourage excessive spending, leading to financial difficulties if not managed properly.
• Not Suitable for Low-Spenders: If you are not a frequent traveller, shopper, or high-spender, the benefits may not justify the high fees, making a premium credit card a poor financial choice.

Premium Cards Comparison with Standard Cards

Here is a credit card comparison of premium cards with standard ones:

Tips for Using Premium Credit Cards

Some of the best steps to follow for using premium credit cards are mentioned below:

• Maximise the Benefits: Ensure you fully use the perks, such as airport lounge access, concierge services, and travel insurance. If you travel frequently or attend exclusive events, the card will provide better value for the annual fee.
• Pay Off the Balance in Full: Avoid carrying a balance by paying off your bill in full each month. Premium cards often have high interest rates, and carrying a balance can erode any benefits gained through rewards or cashback.
• Track Reward Expiry: Some reward points or miles have expiration dates. Keep track of when points expire to avoid losing out on valuable rewards.
• Use on High-Spend Categories: To maximise your rewards, use your card to spend in categories that offer higher reward points, such as travel, dining, or luxury shopping.
• Understand the Fees: Be aware of all the fees, such as foreign transaction fees, late payment fees, and over-limit charges. Ensure you understand the cost of using your card internationally or missing a payment.
• Monitor Spending: With high credit limits, it’s easy to overspend. Set a budget and monitor your spending regularly to avoid falling into debt.
• Take Advantage of Offers: Premium cards often offer special offers and discounts on dining, shopping, and travel. Keep an eye on these promotions to maximise your card’s benefits.
• Redeem Points Wisely: Use your reward points for high-value redemptions, such as flight upgrades, hotel stays, or exclusive experiences. Avoid low-value redemptions like merchandise or gift cards.
• Keep Track of Complimentary Services: Services like concierge assistance, free movie tickets, or golf privileges may not be used often but can add significant value. Make sure you know what’s included and utilise these features when needed.
• Avoid Cash Advances: Credit card withdrawals have high fees and interest rates. It’s best to avoid using the card for cash advances unless necessary.

Final Thoughts

Premium credit card benefits include attractive rewards, services, and high-end perks. However, they also come with high costs and require responsible usage to be beneficial. By making the most of the card’s features and managing expenses carefully, you can enjoy the luxuries without falling into debt. Always weigh the benefits against the fees before committing to a premium card.