Glittering image turns dull

Once they were a status symbol. Now everyone is issuing gold credit cards, writes Nic Cicutti

You have just had dinner with the person of your dreams. Coffees were served an hour ago, the bill has just arrived and it is time to leave. You reach for your chequebook only for your partner to place a restraining hand on your arm. "Allow me," she murmurs, slipping her gold credit card deftly on the waiter's tray.

Sounds familiar? It should: the number of gold cards has rocketed in the past four years, up from fewer than 800,000 in 1993 to more than 2.5 million last year. Gold cards are the fastest-growing sector of the market, with average annual growth of 45 per cent a year. By contrast, the growth rate of standard credit cards is relatively small, just 7 per cent.

William Elderkin, an analyst at Datamonitor, a research consultancy which reported this week on the gold card phenomenon, explains: "Competitive pressure in the standard credit card market is more intense than ever. Many bank issuers have lost share as their traditional dominance has been challenged by a variety of new entrants."

Mr Elderkin points out that the share of traditional issues fell from more than 90 per cent in 1990 to about 75 per cent last year.

Many issuers are turning to the less competitive gold card market, whose holders spent an average of pounds 2,369 last year, compared to pounds 1,334 for a standard card.

The result has been an explosion of new cards, with 24 issuers compared to just four a few years ago.

This week, American Express joined the fray with a gold credit card charging 15.9 per cent APR. To sweeten its offer still further, Amex is offering a rate of 12.6 per cent APR for the first six months.

By combining the introductory rate with the higher one applicable after six months, Amex says users would save pounds 220 in interest payments the first year compared to the Barclays Gold Visa card.

Savings of pounds 72.80 are achievable even on Midland's Gold Visa card which is, however, cheaper in year two and thereafter. In addition, the card issuer claims its service to customers, including higher purchase protection cover and 24-hour emergency card replacement, can beat the opposition hands down.

Debra Davis, vice president at American Express, says: "Our research shows that gold card users expect a 24-carat service and are not satisfied with paler imitations."

Despite the typical pounds 20,000 minimum earnings limit - unchanged for years - most applicants for gold cards are above that limit. A spokeswoman for the Au card, marketed by Royal Bank of Scotland, says the majority of its clients earn in excess of pounds 29,000 and their current monthly card spend is pounds 400. National Westminster Bank users' average income is pounds 30,000.

Card users give a variety of reasons for going gold, including status. Ray, who did not wish his full name to be used, says: "I have had an Amex gold charge card since 1979. I was initially attracted to the green card because it had no spending limit, which was handy for foreign travel.

"The gold card was appealing because it offered a pounds 10,000 overdraft at 1 per cent above base rate. Lloyds Bank have considerably eroded that since. And yes, there was an element of status about it, especially when my improvident boss was refused one.

"The overdraft is handy if you're trying to stag privatisation issues, but that era is over. I prefer to use a Visa which gives Oxfam a bit of money."

Sheila, another user, says: "I got my Co-op Visa gold card because of its principled position, and because it is free for life. As I pay my bill every month the interest rate is irrelevant."

Until recently, the main attraction of gold credit cards was the lower interest payable than their standard counterparts. For example, Barclays' Gold Visa card charges 20.9 per cent APR on purchases, compared to 22.9 per cent APR with Barclaycard.

Many other gold competitors are significantly cheaper, including Lloyds Bank and Nationwide, both charging 17.2 per cent APR on purchases. Sainsbury's charges just 16.5 per cent.

However, the difference between standard and gold cards has been eroded by the entry into the market of a new breed of low-cost competitors, including Peoples' Bank of Connecticut, charging 14.4 per cent APR on purchases.

As well as the Au card, named after the chemical symbol for gold, Royal Bank of Scotland customers have the option of two other gold cards, including the RBS Gold Visa, which charges 17.9 per cent APR.

An RBS spokeswoman says the differences between them are to do with the fact that Au is designed to appeal to people who do not already have an account with the bank.

In practice it is hard to see why one should go for gold when less precious metals will do just as well. Unless you are a heavily into status. In which case, truly discerning customers may have to look beyond gold and to platinum, titanium or similar metal exotica for the extra kudos.