Credit Cards for the Well-Heeled

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Tom Pallack, a retired software company CEO, decided he wanted an American Express Centurion credit card when he was at the Sundance Film Festival a few years ago.

Because the seats to the movies at the festival are first-come, first-serve, people often stand in line for at least an hour to see the most popular shows. But Pallack noticed that while everyone else was waiting in the cold weather, the Centurion cardholders got bused right to the theaters and given the best seats.

When he talked to people who held the card, they told him he could use it for meeting celebrities. Soon enough he was signed up for the Centurion, sitting at a dinner table with several others like him and Robert Redford. "It gives me access," Pallack says. "I'm able to do things that with just pure money I can't do."

The Centurion has an initiation fee of $5,000 and costs $2,500 a year thereafter; believe it or not, credit card companies describe offers like these as a privilege that only a few could dream of attaining. These "premium" cards, which tout perks ranging from private jet service to help with your restaurant reservations, are all over the place now.

It's happening as executives in the cutthroat industry battle for rich customers. "There haven't been a lot of [higher-end] cards until the last two or three years," says Curtis Arnold, founder of CardRatings.com. "They've been going after that [high net worth] demographic in very aggressive ways."

American Express(AXP) introduced the Centurion in 1999, but now the New York-based giant faces competition from other premium cards. When the Luxury Institute surveyed 526 pentamillionaires in April, May and June, the largest share of respondents -- 40% -- said they had held the American Express Platinum within the past year. But the Visa Platinum was a close second with a 37% share, MasterCard(MA) Platinum followed with 30% and Visa Signature with 20%. Only 8% of the respondents said they'd used the American Express Centurion, according to the survey.

The Centurion is "one of the most sought after premium cards," says Monica Beaupre, spokeswoman at American Express. "It's by invitation only." Beaupre says that to obtain such an invitation, you'd have to spend at least a quarter of a million dollars within a year using another American Express card. (The lower-level Platinum, for example, costs $450 a year and includes benefits such as private jet and yacht services.)

Milton Pedraza, CEO of the Luxury Institute, says most pentamillionaires -- those with a net worth of $5 million or more -- pay off their bills every month, so they usually care less about the interest rates or fees on the cards than they do about perks such as airline reward programs. People who wrote responses to the Luxury Institute survey said they preferred their cards for reasons that ranged from customer service to prestige.

"These cards can be interesting to people who aren't ultra wealthy, but only nearly wealthy," Pedraza says. While many among the wealthy wonder why they should bother, others do manage to get good value out of them, he added. "It's often really about business."

For example, if Pallack had been a screenwriter, he might have been able to use that meeting with Redford to get his latest script a hearing. On the other hand, he could also have networked his way into the scene, for considerably less money but more effort, by schmoozing Redford's acquaintances at Sundance instead.

Besides the exotic perks, the luxury credit cards provide an overwhelming number of sales pitches and coupons. For example, Visa Signature cardholders get $5 off on orders of $50 or more on Target.com. People with Premium MasterCards can buy four cook booklets and a two-year subscription to the culinary magazine Saveur for $20. American Express Platinum cardholders can get 20% off tuition at ESPN Golf School.

Most luxury cards include things such as phone access to lackeys who will do chores such as arranging your restaurant reservations or buying your plane tickets. When Pallack was sailing around Halki Island in Greece this summer, he lost his wallet. To solve the problem, he called the concierge service that comes with his American Express Centurion card. "I have no idea what they did, but I was able to get cash the next day," Pallack says. "To me, that's cool."

One way to get savings on a premium card is not to pay for it. For example, on June 11 Bank of America(BAC) announced it is launching the Bank of America Accolades American Express card. Anyone who is willing to cough up the $295 annual fee can obtain this card -- but you'll get a full rebate if you have a credit line of at least $100,000 and you're a private banking client at U.S. Trust, a unit of Bank of America. The Accolades card comes with perks such as medical evacuation in emergencies and complimentary access to more than 500 airport lounges.

When considering a high-end card, first identify the perks you know you'll use, CardRatings founder Arnold advises. Then make sure you can't get them from another credit card with a lower fee. "Bear in mind that a lot of the cards with no annual fees have nice benefits," Arnold says.

For example, the Continental Airlines(CAL) Presidential Plus World MasterCard has an annual fee of $375 and provides many benefits, including Presidents Club membership and 2,000 Flex Elite Qualification Miles (the kind that don't expire) for every $25,000 in purchases on the card. But if you care only about the the number of miles you get for your buck, you might want to also consider a Miles by Discover Card, which has no annual fee and pays double miles (also promised not to expire) on any airline for up to $3,000 in travel and restaurant purchases, and one mile for every $1 of all other purchases.

How large is the market for these premium cards? According to the payment-systems newsletter the Nilson Report, only 1.5% of all credit card holders make more than $100,000 annually. Those people account for 20% of card spending.

"There's more competition with cards that don't charge annual fees, so the ones that do charge fees are somewhat of a niche," says Ben Woolsey, director of marketing at CreditCards.com.

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