You’ve probably noticed something while comparing credit cards. Some credit cards come in different tiers, or levels. For example you’ll have a standard or classic version of the card. Then you’ll have higher level versions like a gold card or a platinum card. Why exactly do credit card companies do this?

Why can’t a bank just issue one credit card with one set of terms? Well, some do. But today let’s talk about the ones that don’t.

Credit Card Tiers: Differentiating Factors

One of the biggest differences you’ll find between different level credit cards in the same “series” is the maximum potential credit limit. A standard card will generally have the lowest possible credit limit, whereas you can get a much higher credit limit with a platinum card.

Of course with higher credit limits also come stricter approval requirements — the platinum card will usually have a significantly higher minimum annual income requirement for applicants. You’ll also probably need to have an even better credit history for platinum card approval. After all, if a company is going to loan you more money, they need to be sure you can pay it back.

Perks and rewards can also be very different. While all cards might be tied to the same rewards programme, the platinum card might offer more points per dollar spent than the gold card or classic credit card. For example, while the Earth credit card and Earth Gold credit card let you earn one reward point per dollar spent, the Earth Platinum card lets you earn 1.5 points per dollar spent instead — a 50% increase for the highest tier card. At the same time, the gold card option gives cardholders free international travel insurance, which the classic card does not.

When you get more rewards and perks, you can also expect to pay more. Sticking to our previous example, you’ll find that the Earth credit card has a $75 annual fee. The gold card increases that to a $125 annual fee. And the platinum card is even higher, at $250 each year.

The Benefit of Tiered Credit Cards

What’s really nice about tiered credit card offers like these is that you can find a rewards programme you like and choose a level that makes sense for you. If you really want to maximise points, you can get a platinum card and pay more. If you don’t want to pay that high of an annual fee, you can scale it back to a gold card. Sometimes the classic version will have some of the perks, the same rates, etc., but no rewards programme access. And that can be ideal for someone who won’t use the card regularly or who doesn’t care about credit card rewards — giving them more of a no-frills option.

Any time you apply for a new credit card, it’s about choice. You choose the features you want, and you find a credit card company that can give those to you at a price you consider to be reasonable. Tiered credit card offers are just a way for a single credit card company to offer you that choice without you necessarily having to look at the competition to find a good fit.