Initiation fees for credit cards

Many of the more exclusive credit cards charge initiation fees to join the card.  These tend to be considerably more than the already high annual fees that the credit card providers are charging.   However many credit card applicants are glad to pay the initiation fees.

When gold cards were first introduced they were invitation only cards.  It was not possible to apply for these cards; a card holder had to be invited.  Usually what decided whether an invitation was sent out was how much spending was done on the card, how much income the borrower had and the card holder’s promptness with paying their credit card bills.

This situation stopped after the growth of gold cards meant that many credit card companies started offering the gold cards to applicants, including totally new applicants who had never used the credit card issuer or provider before.  For a while platinum cards also became invitation only, although now they are also open to applicants.

An urban myth then started that there was a “black card” that was only open to the elites.  This had unimaginable rewards that were not open to those who used the advertised cards.  American Express capitalized on this by offering a new Centurion Card, which was black and had a wide range of services.

The American Express Centurion also had a high price tag.  This was for two reasons.  Firstly the idea was that the card was to make a profit, like all credit and charge cards, and the market would bear high annual fees.  The other reason was that the card was designed to give an exclusive air, and high annual fees gave that air.

There was also an initiation fee that was added on.  Credit cards very rarely have an initiation fee, although some of the no thrills offerings will have an application fee – which is designed to strip out the set up costs from the interest rates and annual fees.  Unlike the credit card application fees, the initiation fee is a multiple of the annual fee, in the case of the American Express Centurion card it is twice the fee, with a $5,000 initiation fee and a $2,500 annual fee.  Like the high annual fee this is designed to give an air of exclusivity to the credit card, and to make the card holders feel that they belong to a club that has a highly worthwhile membership.