It Takes More Than Money to Get a Luxury Credit Card

A woman wearing a sun hat smiles at her credit card while at the beach.

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There are some things made for regular people, and then there are the luxury goods that are only available to a fortunate few. When it comes to credit cards, premium or luxury rewards credit cards can offer you priority service when traveling, access to special events, and admission into the airport business lounges. But unlike many other luxury goods, just being rich isn't enough to qualify you for a luxury credit card.

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What You Need to Qualify for a Luxury Credit Card

To qualify for a premium or luxury credit card, you must first have excellent credit. What does this mean? You'll have to:

  1. Have a credit history that includes multiple accounts that you've managed responsibly.
  2. Pay your bills on time.
  3. Carry very little debt.

Your account balances and payment history will be reported to the major consumer credit bureaus, which will show your creditworthiness. When you apply for a luxury credit card or any other loan or line of credit, your credit history will be run through a credit scoring model that will create a credit score.

The higher the number, the more likely you are to be approved for a new credit account. There are various credit scores and scoring models that creditors may use when you apply for a new credit card.

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How Is Your Credit Score Determined?

Credit scores are created using some of the information from your credit report. Although the companies that create these scores do not release the exact formulas that they use, they do offer some general guidelines.

For example, 35% of your FICO® Score is composed of your payment history; 30% is determined by your amount owed; 15% of the score is from your length of credit history; 10% is determined by your credit mix; and another 10% from your new credit.

In general, if you pay your bills on time and carry very little debt, you have a very high likelihood of having excellent credit scores. The biggest exception to this rule will be those who have a very limited credit history. But after just a year or two of having multiple accounts with no late payments and very little debt, most people will find that they will have good credit and can qualify for most credit cards.

What Does Being Rich Have to Do with It?

When we think of someone who is rich, we imagine a person who has a lot of assets, like an expensive home, a fancy car or just a large balance in their bank account. But when you apply for a credit card, the application won't ask a single question about your assets or the amount of money you have in your bank account.

Instead, the card issuer will be concerned with your annual income as well as your monthly housing payment. Card issuers and other lenders want to know that an applicant will have sufficient income to repay a loan, not that they own an expensive house or car. In fact, it's possible that a person who has significant assets, but with no income, would have trouble qualifying for any credit card, let alone a luxury credit card.

Card issuers have a way of ensuring those who can pay back a loan can be approved for a credit card. For the purpose of a credit card application, your income is not just limited to the money earned from employment. You can report income that you receive from your investments, child support payments, and government benefits. Furthermore, non-working spouses are able to use their spouses' income to qualify for a credit card, so long as they have a reasonable expectation of access to the money for the purpose of repaying a loan.

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Do You Need to Be Rich to Qualify for a Luxury Credit Card?

Because credit card issuers primarily look at your creditworthiness and your income, you don't necessarily have to be rich to qualify for a luxury credit card. For example, you can make a modest amount of money, but still have an excellent credit history and little, if any, debt.

If you fit this profile, credit card issuers will likely approve your application for luxury cards, despite your not being rich in the conventional sense. Card issuers will take into account your reported income, as well as your housing costs when setting your card's credit limit. If you have a lower income, but otherwise qualify for the card, then you are likely to be approved for most credit cards, albeit with a limited line of credit.

Why You Might Not Want a Luxury Credit Card, Even If You're Rich

Luxury credit cards have high annual fees, sometimes as much as $550. This fee can be worth paying, so long as you frequently use the card's benefits. But since most luxury card benefits revolve around travel, these cards might not be worth it for those who aren't frequent travelers.

And even if you are a frequent traveler, you might not be able to utilize some benefits. For example, your home airport might not have a business lounge that you can access with a luxury credit card, or you might fly with an airline that doesn't offer a luxury credit card that provides travel benefits. Finally, a wealthy traveler might simply purchase tickets in business and first class, which can offer numerous benefits like priority service and lounge access, without any need for a luxury credit card.