Platinum Vs. Platinum: The War Over Fat Wallets

AmEx gets serious competition from Merrill in the race to sign up affluent cardholders

Stephen Bradley may well be an American Express Co. cardholder for life. While the New Yorker was vacationing in 1994 in tiny, isolated Coruripe, Brazil, he ate something that made him gravely ill. With no doctor nearby, a friend frantically called American Express about its guarantee to arrange emergency medical evacuation and treatment for Platinum Card users on the road.

AmEx moved fast. Staffers lined up a car to rush Bradley to the nearest large town, somehow booked a room in a sold-out hotel, and sent a doctor there to make a house call. The physician even accompanied Bradley's traveling partner, Richard Laermer, to a local pharmacy for medicine. "When we went home to see our doctor, he told us she had saved Steve's life," recalls Laermer. "For the last five years, we've been indebted to Platinum."

Such heroic tales--along with an armload of amenities that many cardholders swear more than make up for the $300 annual cost--have given the American Express Platinum Card a potent edge over its rivals in the charge-card wars for 15 years. But now AmEx is getting serious competition in the race to serve the well traveled and well heeled.

The formidable contender: Merrill Lynch & Co. Not only does Merrill's seven-month-old CMA Visa Signature card offer similar medical evacuation promises but it has matched many of the AmEx Platinum benefits, from a ritzy frequent-flier-like "rewards" program to a concierge service that counsels on gift-giving or arranges dream vacations. And Merrill does it all for just $75 a year, though you have to open a brokerage account. Boasts Nancy D. Kelly, vice-president of Visa marketing for Merrill Lynch: "Our goal was to build the best product in the marketplace, and we feel we've done that."

A major part of Merrill's strategy, moreover, is to use its card to push into E-commerce. The firm has set up its Web site as a pathway to its brokerage services and into sites from partnering merchants who sell everything from fine wine to books--and offer extra Merrill card rewards points or discounts. The move is partly defensive, too, bolstering brand loyalty among affluent customers and fending off online competitors.

Merrill has recently started targeting AmEx directly. It has been running ads in major newspapers that brag that its card is "miles above platinum" and offers "more rewards and accessibility than a platinum card from you-know-who." AmEx, for its part, says that it won't respond via ads--but admits it has been upgrading its Platinum card to keep its edge. Says AmEx charge-card Vice-President Michele Rankin: "We are No. 1, and we will continue to be No. 1, and we will do what it takes to remain No. 1."

AmEx officials insist that their Platinum shines brightest. Imitators such as Merrill Lynch and partner Visa USA "frankly don't come close," says Rankin. Counters Kelly: The Merrill card "is the best program in the marketplace." A side-by-side comparison, however, suggests it's not so easy to claim being the best anymore in this rarefied market.

HEFTY DEPOSIT. First off, neither card is for the ordinary charge-card user. With their emphasis on travel, luxury accommodations, and entertainment, both are aimed at upper-income folks who regularly hopscotch around the globe. Just to get the Merrill card, for instance, one must hold a Merrill Lynch Cash Management Account, which requires an initial deposit with the firm of $20,000 in cash or securities. Indeed, the typical CMA client keeps about $300,000 in assets with Merrill and pays $150 a year to keep the CMA account open.

The goodies, such as special trips available to cardholders, certainly are lush. For just $65,500 a person, for instance, AmEx Platinum holders this fall can take the Concorde for a round-the-world jaunt (with stops) hosted by retired Lieutenant General Thomas Stafford, a former astronaut. Vacationers will meet paleoanthropologist Richard Leakey and balloon over the African plains. For its part, Merrill helps its cardholders design their own luxurious voyages: "Any cruise line. Anywhere. Anytime."

Both sport concierge services. They help buy gifts, find merchandise, and arrange to recover items travelers left behind while on trips. But they often are asked to tackle tougher assignments. One Merrill client saw a hotel in a movie, thought it would be the perfect place to mark her wedding anniversary, and asked Merrill to find it. A concierge outfit rented the video, got the name of the chic hotel in Zihuatanejo, Mexico, and made all the travel arrangements.

The market for high-end card services is growing rapidly. MasterCard International Inc. has been pushing its frills-laden World MasterCard. With annual fees ranging from $50 to $125, the card targets $100,000-plus households.

AmEx won't disclose its Platinum card base, but industry observers figure there are about 350,000 members. Merrill has signed up 185,000 Visa Signature accounts since last October, and, with 1.9 million people holding CMA accounts, its rosters are likely to swell past AmEx' soon--especially with Merrill's recent big push. "It can be profitable to serve well-heeled clients if you do it right," says David Robertson, president of The Nilson Report, a card-industry newsletter. He says the margins are heftier on these tony cards. Key reasons: The high-end folks use their cards more often than regular cardholders, but few use such pricey services as medical evacuation and programs that guarantee the lowest prices on merchandise purchases.

NEGOTIABLE REWARDS. So which card is best? That depends on how you want to use it. "A good deal for you may not be for somebody else," says Robert B. McKinley, president of Inc., an outfit that monitors card news for the industry. Merrill's user-friendly Web site, with its glossy rewards-program pages and its growing merchant links, is certainly a plus.

Merrill offers a few other clear edges. Its biggest bragging point is a travel benefit that allows clients to use reward points for a flight on any airline at any time, with no blackout periods and no advance purchase or Saturday stay requirements. "Merrill Lynch just goes out and buys the ticket for me," says Richard A. Albertelli of Wilton, Conn. For 25,000 reward points, Merrill gives a $500 ticket, while 100,000 merit a $2,000 ticket. Even more appealing, Merrill lets you design your own rewards. Want a different type of camcorder than the catalog lists for your 62,500 points? It's negotiable.

But with its hard-won clout with restaurants and resorts, AmEx offers a clutch of compelling flourishes, too. While Merrill offers free upgrades at the Ritz-Carlton and Le Meridien hotels, AmEx offers them at 300 hotels and several cruise lines. American Express guarantees a table each night for card members at more than 200 hot restaurants, ranging from Aquavit in New York to Scaramouche in Toronto. What's more, Merrill can't quite match AmEx' companion-travel offer, where clients who buy a full-fare first- or business-class international ticket on 15 participating carriers get to take a companion for free, a nifty benefit for the spouse who aches to tag along on that business trip to Bangkok.

In spots where the competitors have matched each other benefit for benefit, AmEx seems a bit more generous. Both cards, for instance, offer "purchase security" programs in which cardholders are protected against theft or accidental damage to merchandise for 90 days. But while Merrill will repair or replace items for up to just $500, AmEx' coverage stretches up to $10,000.

The bad part about both cards is that, alas, customers face stiff costs if they don't pay their bills promptly. Options for delaying payment can be pricey either in high interest rates or with terms that tie up such collateral as stock. That, however, is no big deal for many of the cardholders. They're people who could otherwise simply write a check to cover their sometimes lavish bills--but who think that it's much more fun flashing that gleaming sliver of plastic platinum.

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