The Visa Signature line was first launched over a decade ago, originally touted as a premium credit card tier for the affluent. However today, this tier is being offered on an increasing number of mid-level, average cards. Furthermore, many banks are switching their existing cardmembers over to the Signature level whether the customer wants it or not. Why is this happening? Is the Visa Signature truly better than Platinum?
What makes it different?
You’ve probably seen those frequent (and somewhat annoying) commercials for the Chase Sapphire card lately. It’s one of the many Visa Signature cards currently on the market, but what makes this class of cards different? Well, in a nutshell, the biggest difference is that these cards have what is known as no-preset credit limits. In other words, there is not a definitive credit limit disclosed to the customer upfront. Secondly, they include some benefits which aren’t often found on other classes of cards. Examples include a phone concierge service, added insurance benefits, etc.
Are these “extras” necessarily better than Platinum?
That depends on what you want to get out of your credit card. Are you looking for something that gives you all the bells and whistles? Or, are you looking for a card that will look the best on your credit report?
If you want a credit card that has the maximum amount of benefits, than the Visa Signature card may be worth it for you. However according to some credit card reviews, their phone concierge service isn’t a whole lot more useful than just doing a simple Google search. Then again, some like being able to talk with a live representative in order to make travel arrangements, get feedback on entertainment services, and so forth. There are also some travel benefits like lost luggage reimbursement and auto rental collision coverage.
While these added benefits are a nice touch, there is one downside many people have voiced a concern over and that is the “no pre-set spending limit” part. Why? Because a portion of your credit score is based on what is known as credit utilization (or in other words, what percent of your available credit you are using). Since FICO’s scoring algorithm is secret no one knows the perfect utilization number to have, but many personal finance experts claim that it’s not a good idea to use more than 30% of your limit on any account. But how does that formula work with the Visa Signature, since there is no pre-set limit?
Again, no one knows the exact answer since the formula is secret, but what people can see are the numbers on their credit report. With a normal card (like a Visa Platinum level) your credit limit is shown. However with Signature cards, many allege that either no limit is shown – or – whatever month they had the highest balance is shown as their credit limit. If this is the case, as you can guess, it might cause problems in the calculation of that important credit utilization number.
Why are Signature cards more common than ever before?
Over the past few years, it seems like Signature tier cards are being used more than ever before. For example, the Chase Freedom card is considered mid-tier, yet it is now a Signature card. Many Bank of America credit card customers lately have been switched to Signature against their will. Meanwhile, MasterCard has a similar no-preset limit card known as “World” which is also being shoved down cardmembers’ throats. In fact, Clint wrote about his Citi Dividend being switched to World MasterCard against his will three years ago.
So why are these no pre-set limit cards being issued so frequently these days? Some speculate that it might be for accounting purposes to benefit the bank. You see, if a customer has a $20,000 credit limit, that is a potential $20,000 liability for the bank. But if the customer has a no pre-set limit, the bank can approve or disapprove each purchase on a case by case basis, dependent on the customer’s credit profile (therefore offering better risk control). In theory, this technique appears to be beneficial for the bank more than the customer.
Going back to the original question, is Visa Signature better than Platinum? Is it worth it? Well, that will depend on what you want to get out of your card. For some people that travel frequently, the perks might be helpful. Meanwhile, other customers don’t like the aforementioned credit limit scenario and prefer the Visa Platinum Card.
You can find our choices for best reward credit cards here.
This post was written by Michael from CreditCardForum; there you will find his Chase Sapphire card review as well as reviews of other Visa Signature cards.