If you could afford a high-end rewards card, what would entice you to drop several hundred dollars on a brand-new card: lavish rewards that dwarf the cost of the card’s annual fee? Or high-end finishes, such as sleek metal encasings, and a promise that the card is only available to a select few? (Personally, I care more about the supersized rewards.)
According to a new study released by the National Bureau of Economic Research, your answer to that question could depend, in part, on how self-confident you are and how much you value flaunting your wealth or social status in front of others.
Enjoy impressing your friends with high-end clothes and luxury toys? That could mean you’re more likely to also flaunt a fancy card – even when it’s not in your best financial interest.
The study evaluated the spending habits and preferences of a small group of elite cardholders and found that many people gravitate to elite cards for their social currency and exclusivity rather than their rewards benefits. Elite cards are traditionally thought of as status symbols, so when you plunk down a high-end metal card, you are signaling to others that you’re wealthy and successful enough to afford an expensive credit card.
People with lower levels of self-esteem are especially likely to reach for a pricey card that they think other people will associate with glamour and prestige, the study found. The more exclusive, the better: If cardholders are told that one particular card is harder to get, they often choose the more exclusive card.
For cardholders who get a kick out of showing off to others, credit card rewards don’t seem to matter much either. The study found that people often use elite cards at bars and restaurants, even when they own less prestigious cards that offer higher rewards for those purchases.
“The customers in our data forgo money in the form of cash back rewards each time they use the platinum card instead of other cards they may own to pay at a restaurant or bar,” the study authors wrote.
Cardholders with higher levels of self-esteem, on the other hand, tend to be less susceptible to superficial marketing tactics, such as when issuers drive up costs and limit access in order to make a credit card seem special. The study also found that when people experienced a boost in their self-esteem, they tended to be less attracted to flashy cards.
Personally, I’ve never understood the appeal of high-end cards that promise exclusivity and prestige but don’t offer the best rewards. Why drop money on a card that doesn’t give you the maximum amount of benefit?
Throwing a heavy metal card onto a table and hearing it “clink” also has never really been my thing. I’d rather have something lighter and thinner in my wallet.
Instead, the high-end cards that have caught my attention are the ones that offer so much value, you can easily recoup your expenses just by using your card for everyday travel and errands.
I also don’t mind pulling out my boring, fee-free cards in front of my peers – especially if I’m getting a significant amount of miles or cash back. Using a less prestigious card to pay for dinner or drinks may not seem nearly as impressive. But does anyone really care these days about what kind of card someone else uses anyway?
See related: Do metal cards cause problems with airport security? Millennials are winners in credit card rewards wars