Why do consumers choose an inferior product even though there are better deals in the marketplace. Well, there are a whole variety of reasons for that. What puzzles me is that it exist in the credit card world in the area of affinity cards. I’m not talking about 0% APR balance transfer deals, but rather am refering specifically to the Hilton HHonors Credit Card.

For many consumers who have been slapped with higher credit card fees, increases in interest rates without any notice, it seems like credit card companies have lots of pricing power in the market. Yes, even though there are more 0% APR Balance Transfer deals around, it seems like credit card issuers who figured ways to somehow trap consumers and impose all sorts of fees.

But when we look at the power that these companies have over big organizations that issue affinity cards, we find that they may not hold all the aces up their sleeves. The two classic examples are credit card relationships with Hilton HHonors and US Airways Dividend Miles.

Rather than letting just one credit card issuer issue their cards, these two organizations have introduced some sort of competition into the market place by letting two credit card issuers issue their credit cards.

Hilton HHonors was the first to let both Citibank and American Express issue their affinity credit cards. It is strange that both issuers allowed this situation to develop. Perhaps Hilton HHonors was a great program and popular when they struck those deals (I’m pretty sure Starwood has overtaken them). When there are two credit card issuers issuing the same credit card for the same organization, you would expect them to compete over features or at least be as competitive. However, you will be surprised that the two Hilton HHonors Credit Cards do not have the same features.

In fact, it turns out that the Hilton HHonors® Platinum Credit Card from American Express is actually the better version. It allows you to earn 5 points for every dollar you spend at Hilton Hotels, standalone supermarkets, gas stations, drugstores, selected dining establishments, US Post Office and Wireless Phone Bills. You also earn 3 points for every dollar you spend on other purchases.

In contrast, the Citi® Hilton Hhonors® Visa® Signature Card allows you to earn only 3 points for every dollar you spend at Hilton Hotels and 2 points for every dollar you spend at other purchases. You would think that Citibank would at least match American Express? But they haven’t. Why? Probably because people still apply for them or do not bother to do more research? Could it be that consumers are not aware that American Express has the better deal? I doubt it because frequent flyers are some of the savviest consumers around. Could it be that having a Visa is better than an Amex because more places accept them? Perhaps this argument held some weight years ago, but not now.

Despite me writing a post showing the differences among the two Hilton HHonors Credit Card, more of my readers applied for the Citi Hilton HHonors Visa than the American Express Hilton HHonors!

So what gives? I think it is really a combination of the above reasons. There are just so many credit cards out there in the market that very few people bother to do thorough research before getting a card. It just goes to show that you do not need the best product in the market place to be successful. In fact, I would argue that in a market with too much choices, consumers may simply not bother to do all the necessary research and comparison.

But if you are in the market for a Hilton HHonors Credit Card, then you definitely want to get the Hilton HHonors® Platinum Credit Card from American Express. And you heard it here first.

This entry was posted on Tuesday, February 6th, 2007 at 12:13 am and is filed under American Express Credit Cards, Citicards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.