Are ultra premium credit cards worth their hefty annual fees?

At such high fees, what makes these cards attractive? Do the rewards exceed the fee? This story breaks down ultra premium credit cards for you to decade whether you need this plastic in your kitty.

What’s on offer

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Kashif Ansari, assistant professor at O.P. Jindal Global University, defines credit cards in this category as lifestyle cards. “The main benefits are not monetary and instead these offer privileges such as memberships of hotel and dining programmes and upgrades on them, besides concierge services and airport assistance,” he said.

This can be seen in the relatively lower reward rates of 1.25-2.5% on some of the most rewarding super premium cards available currently–Axis Reserve, Yes Private and Amex Platinum Charge. The avenues for accelerated rewards on these cards are also limited. If one were to compare the reward rate of these ultra premium credit cards with HDFC Infinia, the highest rewarding card in a category that falls just below these cards, the shine may fade further for those who get credit cards primarily for reward rates. Infinia offers a base rate of 3.33% on hotels, flights and shopping on Tata brands and its annual fee is much lower at 14,750 (including GST). This fee is waived off after the cardholder spends 10 lakh a year.

The benefits

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The various perks bundled with the reward rates could be suitable to some individuals depending on their lifestyle. Sumanta Mandal, founder, Technofino, says the concierge service, for instance, is a useful benefit for businessmen who travel frequently. “The manager you are assigned as part of the concierge service is also your go-to person for all travel and non-travel bookings. It’s like hiring a personal assistant at a nominal cost,” he said. An user of Amex Platinum who did not want to be identified told Mint that he had once gained entry into an exclusive night club in London through his concierge. “My friends and I were on a waiting list of over one hour. I called my concierge and we were let in within 10 minutes,” he said.

Similarly, upgrades on hotel memberships are useful for people frequently staying in those properties. “For someone who only stays in 5-star hotels, these cards will get additional perks like room upgrades, late check-outs, free breakfast, discount on dining, etc,, much faster. These are benefits that they would otherwise get only after booking a certain number of paid nights,” said Tejas Ghongadi, co-founder, The Points Code, a platform that advises credit card users on how to optimize reward points.

Mandal said ultra premium cards let the cardholders upgrade their existing lifestyle. But, this would mean that the additional perks offered are already part of the cardholder’s lifestyle. “If a card is upgrading you to the gold tier of the Marriott Bonvoy programme but you choose to stay in Marriott properties for just a few nights annually, what use is the upgrade for you?” Mandal said.

Are these worth it?

Since the direct monetary value on these ultra premium cards is not much, one can determine their actual worth by evaluating how much value they can extract from its lifestyle benefits. For instance, Axis Reserve card offers 50 complimentary rounds of golf every year at select golf courses, which otherwise entail a green fee (entry fee to a golf course) between 1,000 and 4,000. If you’re not into golfing, how often will you utilize the benefit? Similarly, Reserve offers ‘buy-one get-one’ for movie and non-movie bookings on BookMy show, Eazydiner membership and up to 20% discount on partner restaurants under Axis Bank’s dining programme. But, all Reserve cardholders may not get to use all the benefits.

Before taking a card, check whether the card issuing bank offers a welcome benefit that can help offset the fee at least partially. For instance, Amex Platinum Charge card currently comes with 135,000 MR (Membership Reward) points as a welcome benefit. At a modest 1.25% rate (reward rate on Amex Platinum ranges from 1.25-2.5%), these reward points are worth 67,500. The joining fee of Amex Platinum Charge is 70,800 (including GST), which means the welcome benefit alone will nearly recover the joining fee. Do note that the welcome benefit on Amex Platinum Charge card is not fixed and is usually given as either Taj vouchers worth 45,000. or 100,000 MR points.

Axis Reserve card, which carries an annual fee of 59,000 (GST included), offers reward points worth 10,000 as welcome and renewal benefit. It also offers to waive off the fee after cumulative spending of 35 lakh in the preceding year. This may not be achievable for most as the threshold amount excludes major spends like rent and utilities. For cards issued before September 2023, this threshold is 25 lakh in the first anniversary year.

In such a case, you should assign a monetary value to all the benefits available on the card—benefits that you will utilise in a year—and calculate whether these help recover the fees paid upfront. In the same example of Axis Reserve, the cardholder gets two complimentary nights in Accor hotels across Asia-Pacific. “This will give you a value of 25,000-30,000 and also the loyalty points you earn on the hotel membership. This combined with the welcome benefit and rewards earned will cover the fee,” said Ghongadi.

Cards that don’t give a fee waiver option become a costly proposition the second year onwards as the welcome benefits may not be extended by the card-issuer. In fact, the current ultra premium cards on offer have attractive welcome bonuses to get you hooked to the card’s benefits but it is not advisable to keep paying the annual fees year after year. Ansari said it is better to cancel the card after using it for one year as you may not be able to extract the full value of the fee without the welcome benefits.

Of course, one can still earn rewards on regular spends that can be converted to air miles or hotel loyalty points, but that would require high annual spending. “Ultra premium cards make sense for high discretionary spenders as they offer valuable benefits on discretionary spends rather than regular essential expenses,” said Ghongadi.

In any case, it would not make sense to maintain more than one ultra premium card as most lifestyle benefits, such as unlimited lounge access or concierge service or golf sessions, overlap. Ghongadi said banks should come up with better cards in this category as consumers in India are finally warming up to the idea of paying for credit cards.

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