The other day I got a credit card offer in the mail. This isn’t particularly newsworthy; I’m regularly bombarded by offers, and most end up in the trash anyway. This one, however, caught my eye. It was an offer for the Luxury Black card, one of those super-premium cards with a $495 annual fee. The card itself didn’t pique my interest whatsoever; it was the highly specific wording around their value proposition that made me pause.
Understanding the Black Card Value Proposition
There are very strict rules around how credit cards are allowed to advertise their benefits. I worked in the credit card industry when the Citi Double Cash card was launched; management from every competing card issuer were baffled by how Citi could get “2%” messaging past their legal department. (Spark notes version if you’re unfamiliar.)
Reading the phrase “Value for redemptions” in the Black Card pamphlet was a red flag for me. That wording is extremely uncommon in the card industry, which indicates, to me, something fishy.
Here’s what the Black Card offers cardholders:
- 2% value for airfare redemptions
- 1.5% value for cash back redemptions
- $100 Annual Airline Credit
- $100 towards Global Entry/TSA Precheck
- Metal card
- No Foreign Transaction Fee
- 24/7 Luxury Card Concierge
- Luxury Card Travel (complimentary benefits for certain things when you travel)
- Quarterly issues of LUXURY MAGAZINE
What is “Value for Redemptions”?
The Black Card website has these “helpful” charts in understanding how their redemption rate compares against competitors:
Via Luxurycard.com/blackcard
Via Luxurycard.com/blackcard
According to the first image, the Black Card has a 2% airfare redemption vs Chase Sapphire Reserve’s 1.5%.
Aha! Therein lies the difference. The Chase Sapphire Reserves offers a 50% bonus on points when you book through Ultimate Rewards. That’s how the 1.5% is calculated. The 3% back on travel and dining that the Reserve card offers is not included.
Redemption Rate x Earning Rate
Ahhh, classic misdirection. By highlighting that points you earn with the Black card are worth more when you redeem for airfare and cash back, they’re not clear one important thing: you only earn 1 point for every dollar spent with the Black card.
Via Luxurycard.com/blackcard
Sure, it’s “prominent” on the website, but not highlighted nearly enough.
If the lightbulb hasn’t hit you yet, the Black Card earnings rate means that the card underperforms nearly every premium travel/cash back card on the market, and some no-fee cards as well.
Correcting Comparisons
I don’t have a Chase Sapphire Reserve card (although I do carry the Preferred), but it’s a very popular card within the travel hacking community. So, let’s correct the comparison that the Black Card makes on its site.
Redemption Rate = RR Earnings Rate = ER
On Airfare:
Black Card RR x ER: 1×1 = 2%
Chase Sapphire Reserve RR x ER: 1.5×3 = 4.5% (up to)
With the CSR, you can receive up to 4.5% in airfare redemption on every dollar spent, assuming that you spent on eligible travel purchases and you redeem via the Ultimate Rewards portal.
On Cash Back:
Black Card RR x ER: 1×1 = 1.5%
Chase Sapphire Reserve RR x ER: 1×3 = 3% (up to)
Assuming purchases on just eligible travel and dining, you could receive a full 3% cash back with the CSR, double that of the Black card.
False Luxury and Poor Benefits
Via Luxurycard.com/blackcard
Not worth paying $495 a year for
What really grinds my gears with “premium” cards like this is the utter lack of transparency. Credit cards are complicated enough as it is. It’s bad enough that there are so many predatory credit cards on the market for those with no/poor credit; this is a card going after high-income individuals who may not fully understand the fine print. After the Magnises black card debacle, you’d think companies would try harder.
Does this card make sense for anyone, realistically?
It’s hard to imagine so. What the Black Card does you could get with a combination of a Chase Sapphire Reserve and any no-fee cash back card, or a handful of other low-cost cards if you’re comfortable with using multiple ones.
My suggestion? Skip this, and premium cards in general, unless you’re committed to travel hacking. Have multiple no-fee cards that you can keep forever to build up good credit, and work your way up the premium credit card food chain slowly, and after doing extensive research. $495 for the benefits of a super-premium card only makes sense if you receive more than that in value.
Anyone else run into “interesting” premium card offers like this?