Premium Credit Card APR

Legacy_user

Does anyone know why premium Creidt Cards that charge a fee often have alot higher APR?

Example is the BA amex card - standard card with no fee is 15% (ish) and premium one with £150 fee is 54% APR

I know you get better benefits with the premium card, but how comes generally the APR is higher?

[Deleted User]

The APR reflects the fee, so is misleading in this case. You need to look at the underlying APR.

System

How do you find that out though? it states on Amex's website:

Representative example: Representative 56.4% APR variable. Based on annual fee of £150 and assumed credit limit of £1200. Interest rate for purchases: 19.9% p.a. variable.

Does that mean its 19.9%???

[Deleted User]

Yes, which I guess also sounds quite high. What you have to remember is that a lot of these products are for people with good credit and who know how to use credit cards properly. I would expect that the vast majority of people with the Amex BA Premium Plus card repay their balance in full each month and therefore don't care about what the interest rate is.

You really don't want to carry a balance on rewards credit cards as the value of the reward (Avios in this case - I value these at about 1p each) will be wiped out by the interest charges.

[Deleted User]

Correct - it's 19.9%. The 56.4% figure rolls in the £150 as a cost of borrowing, effectively as if it is interest on borrowing £1200 for a year - which again is only a hypothetical figure.

So a little higher than the standard, but not a million miles out. I would guess they have found that the type of customer willing to pay a fee for benefits they value are not too concerned about the rate, as long as it is at the lower end.

System

Makes sense I suppose!

Thanks for your help!

zerog

That APR figure is not "representative" at all because everyone with that card will spend at least £10000 per year on it unless they are idiots / lost their job / died etc. And they generally pay it back in full, so the real monetary APR is 0.015%