Dec 4th, 2007
If you carry a classic American Express Green, Gold, or Platinum card, or any other credit card that has no pre-set spending limit, you probably know that no pre-set limit does not mean no limit. So how is your spending limit calculated, and what happens if you hit it? I found out last month.
Classic American Express cards are charge cards, not credit cards, meaning the balance you charge on the card is due, in full, each month. AMEX makes its money on these cards by charging an annual fee and from the merchant fees it collects for each transaction.
Therefore, rather than designating a specific credit limit, American Express allows you to charge whatever it thinks you can afford to pay off each month, hence the cards have no pre-set spending limit. To clarify, many new American Express Cards like Blue Cash and the Delta SkyMiles Card, are credit cards with designated credit limits.
Last month I used my American Express Green Card for reimbursable expenses on a business trip, charging about $1,200 to the card over the ordinary personal purchases I make each month. Towards the end of the month I received a call and letter from American Express saying, it appears you are charing more than we anticipated, and therefore, new charges will not no be approved until we receive payment. I had reached the card’s spending limit.
How Your Limit Is Calculated
American Express determines spending limits based upon your reported annual income and your payment history with their cards.
I haven’t had an American Express Card for long, and this is the first time I have used it for business expenses, so it’s no surprise the amount of charges seemed high. Fortunately, AMEX approved my last transaction and then notified me I had reached my limit. Chances are a larger purchase may have been denied, and then they would have told me, which could have been embarrassing.
To avoid such a situation, expect to have a low credit limit when you start using a no pre-set spending limit card. Charge a bit to it the first month, pay on time, then charge a bit more each consecutive month.
If you want to make a large purchase with such a card, for example to earn rewards points, you can call the card to ask them if it will be approved before charging. Additionally, you can increase the charging power of your card at anytime by making payments more frequently than monthly.
Many people see “no pre-set spending limit” on American Express Cards and other cards and think they can buy a car with that card, for example. Unless you have a six-figure salary and a history of charging tens of thousands of dollars a month and paying that balance each month, it’s unlikely your new car will be approved unless you provide documentation to American Express of having those funds available in some other account.
If you have good credit, you are more likely to get a large credit limit with a regular old credit card.
None the less, I am a big fan of the classic American Express cards.
Why I Still Like American Express
Yes, they charge an annual fee when many credit cards don’t. Yes, they aren’t accepted everywhere. Yes, you don’t know exactly how much you can charge on them.
BUT: They are charge cards, not credit cards. Unless you explicitly ask to pay for a particular purchase over time, the balance is due each month, and you cannot incur new charges if your balance is unpaid or too high.
American Express charge cards are a great tool for people who need the convenience of a credit card but who have had trouble with credit card debt in the past. And, contrary to popular opinion, you don’t need spotless credit to get approved for the basic American Express Green Card.
American Express Cards and Your Credit Score
Having no derogatory info on your credit report helps, but if you have been denied credit cards for having too many high balances, you may still qualify for an AMEX charge card (not their credit cards).
One final note: There is some thought that no pre-set limit cards aren’t great for your credit report because they do not report a credit limit.
If you have no other revolving credit accounts, or many revolving accounts that are at or near their limits, having an additional charge card on your report could be harmful. I think, however, that if you have one or two other credit cards with zero or low balances, an American Express Card will not hurt you.
To be ultra safe, if you plan to apply for new credit, pay off your American Express card in full and don’t use it in the month before you apply for new credit.
Do you have any experiences with running into your AMEX credit limit, or have you found an AMEX card to be a helpful tool? I’d love to hear!
On one of my other sites you can compare and apply for no pre-set spending limit credit cards, including the American Express Green and American Express Gold Card.
I'm David, an ex- financial journalist and recovering debtaholic. I'll help you get out of debt, get saving, and get on with life. Sound good? Please subscribe (RSS or e-mail) or follow me on Twitter.
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David,
Great post. I’ve never tried an amex card, but want to get one soon. Another advantage of them is the lowe fees for currency translation. I do much overseas travel and that would be helpful.
btw, your middle column is getting bumped to the bottom of your page. I’m viewing with IE version 6.0.
I’ve heard that about the currency exchange rates too, which sounds like a nice perk if you travel abroad.
Thanks for the heads up on the style issue — hopefully it’s fixed now!
I am a 12 year customer of the gold card. I have a perfect payment history and have ever had a problem…. until this year. AMEX has started a new policy of averaging your usage for the last 3 months, evaluating your credit score on a monthly basis (a score by the way you cannot obtain without a fee), and then setting limits on your spending. This is whether you have a perfect payment history or not. By doing this, they limit their exposure to risk in the declining economy (in their opinion), however they also alienate perfectly good customers that have been only sporadically using the card and may have recently incurred more debt (like a new car or new house). This is a ridiculous policy and the idiot that came up with it should be fired. Not to mention, I hope someone in the Govt realizes the unfair practice of using a score to decline credit, a score which the consumer has to pay to see. I have seen my “no limits” spending feature dropped from “unlimited” to $21K, to $8K. This is because when they pissed me off the first time by changing from “no-limit” to a $21K limit, I stopped using the card for business travel. Then, as I did use it sporadically, they lowered the limit again because my “average” usage was low. How stupid is that? My recommendation, pass the word along and have everyone you speak to complain. Call them and complain, write them and complain, email them and complain…and…stop using the card! If their usage drops and their complaints rise….someone in AMEX Corporate will get wind of it and hopefully fire the idiot that started the new policy.
I recently ran into the spending limit scenario as described by ORFisherman. I disagree with the spending limit because my entire background payment history, credit score, debt to limit ration was very good. The biggest issue I had was the imposition of the limit without receiving timely communication from American Express. My response to this behavior was simple…..I cut up the card and sent it back to them and told them to close my account. In simple terms I was a good customer with a good history who was alienated by this policy. I don’t have time for those kind of games so I decided to convert all those nice merchant fees to one of their competitors cards. American Express really knows how to MISmanage their business. I agree the idiot who thought up this underwriting policy should be fired for the good of American Express.
I just got off the phone with American Express, who, it seems, cut off my Platinum Card (member since 1999, and pay in full monthly) “unlimited” spending to $3K (with no notification at all). Nice.
It seems that they now average your 6 month spending and limit your “unlimited” spending to the “average” amount spent over that time period. BUT – they refuse to say the card has “a limit” – was on the phone with them for an hour and they wouldn’t say the words….(good brain washing, er, training of the employees). I use this primarily for biz expenses and didn’t travel much for work this summer. Thus, my “average” spending was lower, and thus I have a useless AmEx Platinum card. What is the $450 annual fee for??
Also, they said this was part of the terms and conditions of my card and therefore didn’t need to contact me about it. I’ve spent over “$3K” average many times over the years and have never been cut off before.
Looking for a new, cool credit card company that actually communicates with their customers. Know any?
Gee, wish that they had notified me of this before having my “unlimited” spending amount cut off when purchasing a business flight on United!
I have come to the same situation that last few people have noted.
I have had my AMEX card for about 4 years, since I was 18. Never had an issue with it—in fact, it’s my favorite card (or perhaps use to be), because I could use it, and never had to worry about it working. I use to occasionally use it… maybe putting $500 on it monthly for misc expenses. In the last few months, I decided I’d start using it for most of my expenses to avoid using standard credit cards and get them all paid off. Now, I’m set for spending maybe $2,000 on the card every month to cover my food/gas/whatever for a typical month.
From my understanding, my card is “unlimited” (within a very fair reason, ie – I don’t expect to be able to go buy a $40,000 car with my card, but I would expect to be able to easily charge $5,000 on it out of the blue).
Well, last night, I go up to Target to buy a few Christmas decorations for my new apartment. Go up to the counter, $125, use my card… declined. Weird—is what I thought. Never had the card declined before; I knew I had the card paid off well on time; I have charged way more than that before; my balance has been way higher before; etc. No problem, some mistake (I thought), so I used my MasterCard.
So, this morning, I log onto my account… and my card, says ~$100 available, and I only have about $900 on my card. !?!?! Where the hell did this limit come from? Googling around, I come to this article, and as I read from the users above me, AMEX is now applying this new policy. !?!?!
I think it is ridiculous. I mean, I understand having to “protect” themselves from the falling economy, but damn. This just seems like such a bad move. I mean, I averaged $500 previously. But lately I’m looking to average way more, and now I can’t do that, unless I want to make multiple payments a month. It is very annoying! What makes me most angry, is that I wasn’t notified about this new policy, at all!
Unlike the users above me, I probably won’t stop using my card yet… but if this doesn’t get better I AM going to consider it.
I hope someone in AMEX will FIX this policy!!
amex is gona losse too many costumer the stupid new policy is just stupid my wife have 3 different amex card and she pays very well . and now they want to her prove her income , and that is just stupid because i take care of her . so they say we are going to close the accounts that is just garbaje fu……. amex
I have just received my new Amex cards. The BA blue, and the ‘no limit’ classic green. I’m quite impressed with them so far. My average expenditure is forecasted to be around £2000 monthly, so lets see if the no limit is actually BS as you say.
My story: Amex Platinum for 10 years, spent about $6K for work per month (self-employed and this was reimbursed by clients), perfect payment history. What did I get? Amex dropped my “limit” to $2K with NO warning (no letter, no call, nada). I needed an airline tix for work – and got cut off when making the purchase. NOT COOL. When I called them royal run around too long to state here. VERY RUDE/EVASIVE customer “service.” Platinum Card? = so not worth $450 per year. I’m finding a company that treats their customers with respect. Amex is not on that list.
Well its good to hear we are all in the same situation. Unlimited to 28,500 on 11/15/08 down to 4,900.00 as of Jan 28th. Multi – Business owner and card member since 94′. They will loose my business and we find there practice ridiculous.
What is the average credit limit for new American Express customers?
appears i have just been cut off @ 2k. tried to make a $37 purchase and was denied. luckily it was over the internet and not in person. ive always paid in full on time every month since 05. now suddenly i have a limit?
I’ve had my Amex card for a couple months now without a problem. I’ve charged several hundreds of dollars at once to $1100 the other week for a new LCD, etc and assumed that I did have the “no pre-set spending limit” so I’ve been using it for a number of things so I wouldn’t have a problem in the long run. I guess it’s unsettling reading this, if any is true, that Amex seems to be misleading. Actually, just found out I have to pay my bill in full each month, lol. Of course that’s not the problem, but I’d rather pay some other things off like the new car I charged on my Capital One card which seems to have no problem increasing my limit by several thousand dollars a couple times a year with excellent payment history. Hm… maybe I made a mistake in going with Amex. We will see….
Same here. My $25K card with a high of $21800 went to $2000 then to $500. I called and they said to make a payment so that my medication charge would go through from Costco. Member since 1996, averaged $4000 per month use, paid off in full every month, never late. I said, hello, look at the payment history, you’ve gotten over $700 worth of payments in the last two weeks along, and I’ve send in three more. The charge will be declined because you can’t keep up with my payments, how about even a tempory authorization so the meds will clear. “We don’t do that anymore” was te answer. Anyone have a better company? This is rediculous.
I have had the same issue with Amex, and I am going to can them! If you are interested in a company that doesn’t randomly lower limits and has been very good to its customers, I’d check into Capital One. I have 2 of their cards and they have never ever cut me off or lowered my limits. They seem more than fair and I am very pleased with them. I guess “whats in your wallet?” really does ring true!