To Go Premium Or Not – The Allure of Gold Cards

There was a time in credit land where a gold card really did mean something. To be offered a gold credit card meant that you had made it, you were a real professional making real money, and the credit card companies finally smiled upon you. Never mind the fact that once you do achieve good credit, you’re put on enough lists to keep even the most analytical number cruncher busy. Yet times have changed since people first started talking about the world of gold credit cards. As we weather the global recession, credit card companies have to think differently about not only gold credit cards, but who actually carries them.

The reason for keeping gold credit cards exclusive is obvious — bigger spenders who not only spend money, but they know that they have to pay it back. They pay on time and they generally don’t carry balances. They know how precious their credit scores really are, so they don’t want to end up getting things messed up. That’s why in the past the credit card companies wanted to make absolutely sure that gold and platinum cards were mainly for the 760+ credit score holders. Yet now we’re seeing gold credit cards being offered to people in the mid to high 600s. Is this a sign of a new trend?

Yes, but what choice did the credit card companies honestly have? The recession has made companies really work on try to actually get the runaway profits that shareholders have come to expect. If they don’t find creative ways to raise the bottom line, they’re going to have a lot of unhappy shareholders.

The perks of having a gold card are definitely nice — sign-on bonuses and premium customer service — but is it a good idea? The danger of carrying too many credit cards is that you’re obviously going to be tempted to use them. Having a credit card on your side means that you’re going to be able to get things that you don’t have money for. If things go sour with your finances, you’re still on the hook for the money owed to the gold card.

Don’t think that these gold cards actually come cheap, either — you will need to pay an annual fee eventually, using around $75 – $150. Hold onto a card like that for even a year or two, and you’re already paying for all of those nice bonuses that you got just for signing on the dotted line.

By the way, many of these cards also include provisions for universal default. That means that if you are late on any credit card and it shows up on your credit report, you can expect your interest rate to go up. If you’re late on the gold card, you’re going to face another problem — late fees and interest rate changes.

What about those nice gold cards that don’t have any defined spending limit? Not as nice as you think they are. It’s very easy to lure people into believing that they have a limitless card — but in the fine print there is usually another provision that states they have the right to change your limit at any time. This means that if you start spending good money, and then turn around and get a big ticket item — your transaction might not go through.

Sure, there might not be a hard limit per se, but there’s definitely some sort of limit in place. Calling the credit card company and getting actual confirmation is the way to go. If you don’t figure out what your limit is and you go over, the credit card company can ask for the entire amount of the charges immediately — and then punish you further if you don’t pay up quickly.

Yes, we’re willing to admit that we’re taking the hard line here when it comes to your finances and the addition of a gold card. Yet there does come to a point where you have to look at the bigger picture and then make your decisions from that perspective. So don’t worry too much — look at all of your options, and do what makes sense for you!