Avoid This Credit Card Con!

Here's one type of credit card to be avoided... even though it offers you loads of fantastic plastic perks!

Once upon a time in a land, well, not too far away from here, I worked at a high street store in central London to help me get by while at university.

During the few years I worked there, I saw everything from poor quality fake notes to people trying to return garments which had clearly been worn to shreds.

But one thing I'll never forget is the first time a customer handed over their American Express Centurion card to pay for their goods.

I was in awe.

Also known as the `black AMEX', the card is available by invitation only, and although you don't necessarily need to have to be a millionaire to have one, you definitely need to be a big spender.

But while the Centurion card may equate to prestige, it also comes with an annual fee of £650 - which, for most of us, is no small sum.

Premium plastic perks?

There are a wealth of credit cards out there promising you the earth - and more - in return for a fee.

These `premium' cards give you similar benefits to the sort you'll receive if you had a packaged current account, which some banks offer in return for a monthly fee.

This can include travel insurance, a concierge service, airport lounge access and a whole host of other benefits packaged nicely within a piece of shiny black plastic. You'll also automatically get a higher credit limit, usually upwards of £10,000.

But when it comes to being Foolish, are they really worth it?

Let's start off by comparing a few fee paying credit cards on the market with their fee-free equivalents:

As you can see, the price of going premium is not cheap, and the most expensive card here will set you back £275 a year.

For example, the i24 card (available again from next month when new owner Barclays relaunches it) comes with comprehensive travel service, airport lounge access at 450 airports, and a concierge service - on hand to help you with anything from getting a bunch of flowers to booking a flight.

You also get commission free use abroad, saving you money on the transaction and loading fees normally associated with overseas use.

However, because of the £275 fee, this takes the APR up to a staggering 57.4%. That's more than triple the rate of most credit cards - and  almost the rate of even cards targeted at people with less than perfect credit records.

And, with travel insurance getting increasingly cheaper, Neil Faulkner recently highlighted that annual family travel insurance including worldwide winter sports cover should only cost around £70. As for the rest of the benefits, you have to weigh up what they're worth to you.

You could claim the fee back through your spending, as the i24 card does offer 1% cashback on all purchases. However, you would need to clock up an annual spend of £27,500 just to break even.

And, to illustrate the money you could make by using a fee-free alternative, if you spent that same amount using my personal favourite, the American Express Platinum MoneyBack card, you would earn £345 in cashback over the year, which you are free to spend as you wish.

Fly in style

You could also accelerate your rewards by paying an annual fee for a credit card that offers free flights.

Take, for example the Virgin Atlantic Black credit card. One of my best friends owns one, and couldn't stop singing its praises when she first received it.

However, when she went to redeem the mighty 33,750 miles she had accrued for what she thought would be a bargain trip to the Big Apple, she discovered that those all important taxes and fees were not included with the flight.

This meant that in the end she'd only be paying £80 less than if she decided to book via the Virgin website. In her own words: "Rude!!!"

The fact is, nowadays, fees and taxes almost always cost more than the price of the flight itself, so while paying a fee on your credit card will accelerate your earnings potential, I wonder if it's really worth it.

The only real value I see in these cards is if you're a frequent flier. In these cases, you can accelerate the amount of miles you receive when you book a flight with either Virgin or BA, plus, if you spend enough each year, you'll qualify for a free companion flight or in the case of Virgin Atlantic, an upgrade to Premium Economy service. A nice treat, especially if you're venturing further afield.

Fee Free Flights

If you want to avoid paying taxes and fees altogether, you could opt for the fee-free Lloyds TSB's Airmiles Duo credit card, part of the Airmiles scheme where flights redeemed include all charges. You can build up miles more quickly by shopping at other Airmiles partners, such as Tesco and Shell petrol stations.

And, if you apply through the Airmiles Website before 31^st October, they'll even thrown in 1,500 bonus miles, enough for two return flights to Paris or Amsterdam.

When all is said and done, premium cards are ultimately a choice. Those in favour will argue that convenience has its price. However, for me it's one not worth paying and ultimately I'll be sticking to my fee-free credit card - unless that is, American Express decide to send me that all important Centurion card invite.

Though something tells me I could be waiting for quite some time.

More: Get Free Flights With Your Credit Card | The Classic Current Account Con