No one ever oohs and aahs over my run-of-the-mill plastic credit cards.
On the other hand, my American Express Platinum card does elicit interest from some people. Maybe it’s because the word “platinum” is plastered on it. Or because it’s platinum-colored. Or because it’s made of metal.
Whatever the reason, my American Express Platinum card appears to be something of a status symbol.
Now, we’ve got some academic evidence to help explain the allure of metal cards.
The value proposition of platinum
Researchers undertook a study to measure people’s perceptions of “status goods.” In this case, the status goods were credit cards offered by an Indonesian bank.
The researchers discovered that demand for the bank’s platinum card – reserved for high-income customers – was “substantially higher” than demand for the card’s perks. They learned this by presenting consumers with two scenarios:
- An offer of the financial services and benefits of the platinum card, but only as an upgrade of a nondescript credit card.
- An upgrade to an actual platinum card.
By a considerable margin, consumers preferred the offer of the actual platinum card. In other words, consumers assigned more value to the card itself than to any of the card’s benefits, such as a higher credit limit and discounts on luxury items.
“Transaction data reveal that platinum cardholders are more likely to use the card in social contexts where others may notice it, implying social image concerns,” the researchers observed.
Of course, not every consumer jumped at the card offers. The researchers found that the richest customers were much less likely than their lower-income counterparts to hop on either of the card offers.
“Our interpretation is that richer individuals already have ways to signal their income, while the platinum credit cards are a more powerful … signaling tool for those with comparatively lower incomes,” according to the researchers, whose study was published in 2017.
“Alternatively, it could be that richer individuals simply care less about social status altogether.”
Before I move on, I must take issue with that last statement. Do these researchers keep up with the Kardashians? Kim and her clan care a lot about social status. And so do many other wealthy folks just like them. But maybe that mindset is less pervasive in Indonesia?
Showing off in public
Delving into the flashy nature of a prestigious credit card, the researchers discovered that holders of the Indonesian bank’s platinum card were more likely to pull out the card in social settings like restaurants, bars and clubs.
However, the researchers saw no uptick in “private” uses of the platinum card, such as online shopping.
Translation: Some of these cardholders were show-offs.
The status symbol of the card did come at a cost, the study found. The platinum card offered no cash-back rewards, yet 48 percent of the cardholders reported having other cards that offer cash back for purchases at social places like restaurants.
Dazzled by a ‘diamond’ card
To demonstrate the appeal of credit cards as status symbols, the researchers also dangled an offer of a new “diamond” card – available to people with even higher incomes than the Indonesian bank’s existing platinum, gold and classic cards.
Demand for the diamond card rose from 21.5 to 40 percent when consumers were told the platinum card was available to a bigger pool of customers because the income requirement was lowered.
This was despite the fact that the fee for the diamond card was higher than the fee for the platinum card, and that the perks for the diamond and platinum cards were identical.
A golden lesson
While the experiment was conducted in Indonesia, I don’t have to take much of a mental leap to conclude that the psychology of status-symbol credit cards is much the same in the U.S.
I imagine the global team of researchers – from Harvard University, the National Bureau of Economic Research, the Sao Paulo School of Economics, UCLA, the University of Chicago and the World Bank – reached a similar conclusion, although that wasn’t reflected in their study.
To me, this study underscores the universal notion that we’re all striving to better ourselves. Some of us, though, want to elevate ourselves to some extent through the credit cards we carry. But no credit card – platinum or otherwise – can reveal our true worth.
See related: Credit cards compete to make you feel like a VIP, Luxury credit card reviews