NOW, GOLD CARD FOR EVERYONE

A
n invitation to join the ranks of gold- and platinum-card holders isn't the exclusive privilege it once was. Issuers are offering more of these cards, to a wider range of people. The question now: Do you still want one?

If you haven't gotten a pitch for a premium card in the mail lately, it's probably on its way. Almost one of every three credit card offers mailed in the second quarter was for some kind of premium card, up from one in four sent at the same time last year; in the past year, pitches for such premium cards have more than tripled, according to Synovate Mail Monitor. And card companies are targeting consumers with credit scores in the 600s, too, instead of just the top-shelf 760-plus category. "People think these cards are an 'only available for the rich and famous' kind of thing, but they're not," says Curtis Arnold, the founder of comparison site CardRatings.com. "They're approving a lot more people."

 

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Normally the credit card of choice for the wealthy and privileged, gold cards are now being made available to people with lesser credit scores. But WSJ's Kelli Grant tells Lunch Break the card's fee structures aren't for everyone.

Why open the gates? Card companies like premium cardholders because they tend to pay off their balances quickly, which makes them low-risk, and spend a lot, which makes them profitable -- especially because premium cards often charge merchants more to process the payments, says Dennis Moroney, a research director at consulting firm Tower Group. By widening the pool to customers with only slightly less sparkling credit histories, they're hoping to attract another swath of spenders, without taking on much more risk. "They're the choice customers in weak economic times," Moroney says, but they need an incentive. Most have a few cards already and aren't looking for another.

To that end, companies have beefed up their sign-on bonuses. It's typical for a card to offer $250 or more in rewards or gift cards for spending, say, $3,000 in the first three months. Compared to past offers, "it's almost worth getting the card even if you don't plan to use it," says Andrew Davidson, a senior vice president at Mintel Comperemedia, which tracks card offers.

There may be ongoing benefits, too. MasterCard, for example, recently introduceda new service for premium cardholders that automatically tracks airfare prices and applies for a credit on purchased tickets if they get cheaper. This summer, Visa Signature offered card holders two-for-one movie tickets through booking site Fandango every Friday.

But premium cards can carry premium pricing. To get the rewards points, the movie tickets, and the concierge services, card holders will often pay up to $150. After two years, you've more than paid for that initial sign-up gift, and card holders who don't regularly use the other benefits may be better off with a lower-frills but free card, says Davidson. A few premium cards, like the Bank of American Power Rewards Visa Signature, Fidelity Investment Rewards Visa Signature and Citi Dividend World MasterCard, don't charge a fee, but the sign-up benefits and ongoing benefits don't tend to be as generous.

Consumers should also be cautious about a common promise of premium cards no preset spending limit, says Odysseas Papadimitriou, the chief executive ofCardHub. That doesn't mean no spending limit it just means you don't know what it is, and the issuer can change it at will, he says. That means a shopper could be declined for a purchase without advance warning, or face much higher monthly payments, because any amount over your credit limit is due immediately. Depending on how the issuer reports your credit, it could also hurt your credit score. To find out what your credit limit really is, call the issuer, advises Papadimitriou, and with any big purchase, it's a good idea to clear it with your issuer first.