Standard, gold, or platinum - What's the point?

• Guides
• Published: 16 Oct 2008 in Money and Credit Cards

When you look through credit card options and apply for specific offers, many providers offer options for cards called standard, gold, or platinum. What is the difference between these cards aside from the fact that they have different names?

These common card types are basically ways to distinguish a credit card company’s product offers. Rates, fees, terms, and benefits tied to each card are unique to that particular card. Companies use the names as ways to distinguish to card buyers what type of offer they are receiving.

What makes you feel more special – having a bulk standard credit card or a gold one?

The names also have a psychological benefit, making the credit card holder feel ‘special’. Certainly, if you had a choice of two credit cards, both with identical benefits, but one was called the “Red” card and one called the “Gold” card, no doubt you’d choose the latter, purely because it made you feel a little bit important!

Each card has specific benefits tied to it. The key factors to consider when shopping for credit cards include: Interest rates (and whether they are fixed or variable rates), promotional offers, cash back rewards programmers, ability to use the card globally and in most retail environments, card fees, loyalty programs and other specific features and benefits.

The goal of credit card companies is to offer a mix of features that would be beneficial and therefore attractive to many types of borrower. When applying, companies ask that a credit card submits relevant personal and income information. The lender then does a credit rating check to examine the borrower’s credit history, current debt to equity ratio, and potential risks associated with lending the borrower money.

Based on the application, the lender may offer the borrower an opportunity to select from one or more credit offers. Some lenders actually use a borrower’s information to prequalify or preapprove borrowers for promotional offers.

Getting accepted

If, however, you do not meet the lender’s criteria, then you could be declined. In this instance your best bet is to go through your credit history yourself (you can get a copy from Experian, Equifax or CallCredit) and check that all your personal details are correct; all outstanding debts that you have paid off are shown as being cleared; and even check that you are listed on the Electoral Roll. If you aren’t, you will in most cases not get accepted for any form of credit..

Anyway, back to the matter in hand. Platinum cards are usually a lender’s best offer in terms of annual percentage rate (APR), zero percent introductory or other promotional offers, fees, and more. Gold would likely be the next level of benefits, while a standard card is typically offered to new credit card applicants, those with limited credit history, or poor history.

How will you use the card?

Along with the previously mentioned considerations for people looking for a credit card, they should also think about: How they will use the card – ie whether they will maintain a balance or pay off balances immediately; special uses for the card - such as rewards schemes - and how often it would be used.

Some cards are more advantageous when maintaining a monthly balance. Obviously, the lowest rate possible is good when maintaining an ongoing balance. Some card users prefer to borrow a little and pay it off within the non-interest grace period. Borrowers in this situation would likely benefit more from cards that offer better cash back rewards, while the interest would not be as relevant.

Other credit cards are better when used for specific purposes. Many credit cards offer balance transfer promotions to new applicants. Balance transfers allow a new card user to transfer higher rate card balances to the new card, sometimes with or without a transfer fee. This is especially beneficial if the new card has a zero interest or low rate balance transfer option.

And finally…

The most important thing for card shoppers to do is think about what they will do with the card.

• Knowing your credit goals can help you shop more effectively to find the right card for you.
• As with most credit, the number of options available to the borrower is dependent on the borrower’s credit history. The better the borrower’s credit, the more willing card companies are to lavish promotions, low rates, and benefits on him or her, so make sure that your credit score is up to scratch before you apply.