It’s the end of a wonderful night out after catching up with some old friends you have not seen in a while. The waiter comes with the bill and it’s your time to swipe your card. You take out your gold card and this is followed by strange stolen looks of pity and disappointment. Then one of your friends at the table tells you “it’s ok” and takes out his black card to pay for your share of the bill.
If you sometimes get judged by the colour of your personal bank card, you may be experiencing a social construct I like to call “bank card racism.” Bank card racism occurs when a holder of a particular bank card believes that they have more money/wealth than other types of cardholders. Bank cards are issued in a variety of colours. The different colours often define the range and benefits associated with them. The colour of your card is often associated with the size of your pocket which is then translated to social status and prestige. Although card upgrades offer rewards such as private banking facilities, cash-backs and larger credit limits, do the marginal benefits equal or exceed the marginal costs?
Let us say you now qualify to move from your basic gold card to the more prestigious black “private clients” card. The black card promises a more customer-centric approach with perks such as access to private banking services, airport lounge visits, airport shuttles and special rates. Let us assume the private clients card will cost you approximately R285 more each month which is an extra R3,420 every year (which may exclude bank charges). You could maybe justify the extra cost if you used up the facilities comprehensively. For example, although a new card may come with a reward program offering perks such as flights and hotel stays you also need to find out the minimum monthly spend required to earn those rewards. Would you also need to take out a credit card to boost your rewards? Furthermore, if you are not a frequent flyer (especially international travel), what additional benefit are you receiving?
Many banks also require customers to maintain a minimum balance in their accounts as an incentive for monthly account fees to be dropped. In the decision to upgrade your card, you should not only consider the minimum balance required but also think about whether this sum of money would be better off in another interest-earning account.
One of the celebrated features of a “private clients” card are the private banking services. This service usually offers a dedicated private banker to assist you with your personal banking needs. The question is, just how tailor-made are these services? How responsive and dedicated is your private banker? The issue is that some banks appear to be mass producing their private banking facilities which means that more people can now have access to a private banker. If all of us have a private banker, this may compromise the exclusivity of private banking. Additionally, the convenience of online banking makes it easier for you to perform several transactions independently online without the use of a private banker. Again, what additional benefit are you receiving?
All things considered
You should not upgrade to a power card if you do not use it properly and it does not meet your personal lifestyle needs. In the example above, a more powerful move would be investing the additional R3,420 into a tax-free savings account or paying the extra money into your home loan.
Before you go ahead to elevate to the next colour, make sure that the actual benefits exceed the costs. You also need to make sure that you understand exactly what you are paying for by asking the right questions and doing your research. Furthermore, check that your personal bank is not in the business of selling colours, upgrading you only to make you feel special. More often than not, the house always wins. In closing, do not measure a person’s financial well-being by the colour of their card. Short-term status does not compensate for long-term opportunity costs.