Why?

Because American Express charge cards, including the Preferred Rewards Green, Gold, and Platinum cards, provide all the benefits of a credit card—convenience, rewards, fraud and purchase protection, etc.—with one vital difference.

What’s the big deal with charge cards? Well, the balance-in-full is due at the end of every month, meaning I will never rack up a balance I can’t repay. Is a charge card right for you?

Charge cards: The original plastic

The Preferred Rewards Green Card provides convenience, peace of mind, and no pre-set spending limit.

The ability to pay with plastic has been around for decades. But long before we all carried debit cards, and even before credit card companies provided revolving credit limits that did not have to be paid in full each month, American Express offered charge cards. Charge cards worked then—and work now—just like today’s credit cards. The only difference is that with a charge card, you don’t have a pre-set credit limit, and you can’t pay only a fraction of the balance due at the end of the month—you must pay the entire thing. Of course, that means that you don’t pay interest, either.

Why don’t charge cards have credit limits?

The Preferred Rewards Gold Card gives new members 10,000 membership rewards points–enough for a $100 gift card.

American Express charge cards have no pre-set spending limit. That doesn’t mean, however, you can go out and buy a new car the minute you get your card. AMEX takes your credit history, annual income, and your spending history and measures every transaction against your credit profile. Use your charge card for everyday monthly spending that is within your budget and you shouldn’t hit your limit. If you want to make a big purchase on a charge card, simply call up American Express customer service and let them know—they will let you know if it will be approved.

Why use a charge card instead of a debit card?

The American Express Platinum Card provides members access to 24/7 concierge service and airport lounges worldwide.

American Express charge cards are free for the first year but then charge an annual fee. That begs the question: If you use a charge card for the convenience of not carrying cash without the temptation to spend beyond your means, why not just use a debit card? For me, the decision to use my American Express Green Card for most of my purchases is that the card is not linked directly to my checking account.

While debit cards refund most fraudulent charges—by the time you discover fraud, your money may already be gone. It can take days for your bank to replace your cash. When bills are due, that’s not good. Finally, did you know that you may be responsible for fraudulent PIN-based transactions on your debit card? If somebody steals your PIN and debit card, they can totally clean out your account.

But security isn’t the only reason to use a charge card. Using the charge card makes it easier for me to budget. It means I can buy the things I need throughout the month without worrying about short-term fluctuations in my checking account balance. Finally, I earn American Express rewards points with every purchase. Over the course of the year, those rewards can pay for the card’s annual fee and send some extra cash, airline miles, or gift cards my way.

Choosing an American Express Charge Card
American Express is currently the only company I know of to offer charge cards, and they offer three options:

• The Preferred Rewards Green Card »
• The Preferred Rewards Gold Card »
• The Platinum Card »

Green vs. Gold
In my opinion, there isn’t a lot of difference between the Green and Gold cards that justifies the Gold card’s slightly higher annual fee. (After the first fee-free year, the Green Card charges $95; the Gold Card $125). Both offer Membership Rewards and benefits like purchase protection and travel insurance. Gold Cardmembers get special access and rates on “Gold Card events” like exclusive concerts. New applicants to both cards will earn a rewards bonus after their first purchase. Green Cardmembers will get 5,000 rewards points—redeemable for a $50 gift card. Gold Cardmembers will get 10,000 rewards points—redeemable for a $100 gift card.

The Platinum Card
The Platinum Card is reserved for applicants with excellent credit and high annual income, which you’ll need to cover the $450 annual fee. For any business traveler, however, the Platinum Card carries a perk that is worth far more than the annual fee: Worldwide access to exclusive airport lounges on almost every airline. (The cost of joining even one of these clubs can cost more than $500 a year). The Platinum Card also comes with 24/7 concierge service, $500,000 in travel accident insurance coverage, and 25,000 rewards points after you spend $1,000 on the card within three months.

Learn more about the American Express Green, Gold, or Platinum cards now, or apply securely online:

• Apply for the American Express Preferred Rewards Green Card »
• Apply for the American Express Preferred Rewards Gold Card »
• Apply for the American Express Platinum Card »

This is a tricky one. The quick answer is yes, your bank closing your credit card for non-nus probably will lower your credit score, but not by much, and it will hopefully bounce back in a few months. There are a few factors that will determine how much your score could drop:

How long have you had that particular card open relative to your other accounts? If you have had the account longer than any other card, then your credit score could take a bigger hit when the bank closes the account. It will be better if you’ve had other cards for at least five years or longer.

What was the credit limit in relation to your overall available credit? If the card being closed had a high credit limit, the closure will affect your credit score more dramatically because it will reduce your overall available credit by a larger percentage. If you have balances on other cards, it will also increase your debt utilization ratio (the difference between your balances and available credit), which could lower your score until those balances are paid down.

Do you have a balance on the card? (I’m assuming you don’t because you haven’t been using it). But if your creditor closes an account while you still have a balance, your debt utilization will increase because the closed credit line is no longer counted towards your available credit.

Finally, how will the closure be reported to the credit bureaus? Banks notify the tree credit bureaus whenever a credit account is opened or closed. When they are closed, the banks also tell them whether the credit account was closed at the consumer’s request or the bank’s. When the bank closes an account, it reflects negatively on your credit report; the bureaus assume the bank had a reason to close it. But when you close an account, your credit score is not affected.

Here’s what I’d do: First, call the credit card company and see if you can’t keep the account open. Use it a couple times next month, pay it off, and forget about it again for a while. If that doesn’t work, ask them at least to report to the credit bureaus that it was closed at your request. This is what they should do, because you choose not to use the account, but you never know.

At the worst, your credit score will dip 10-15 points as a result of the account closure, and as long the account didn’t make up a large chunk of your available credit, your score should rebound within 3-4 months.

Do you have money questions about credit, saving, budgeting, investing, etc.? I love answering them, so send ‘em in! If I don’t know the answer, I’ll research it for you!

I just snagged a Capital One card to transfer a small balance from a pesky high-rate Citibank card.

Here’s a look at select Capital One credit cards and their interest rates and balance transfer offers:

Capital One No Hassle Miles Rewards (Excellent Credit)

Already one of my top credit card picks for frequent fliers; Capital One lowered the regular interest rate from 13.9% APR to 9.90% and added a 0% APR on purchases and balance transfers until October 2009. (A 3% fee applies to transfers). This card does require really, really good credit. If yours isn’t spotless, try one of the other cards below. Learn more about this card »

Capital One® No Hassle Cash Rewards (Good Credit)

For those with good credit, this Capital One card makes a great gas and general cash back rewards card. You’ll earn 2% cash back on gas and groceries, 1% back on everything else, with no limits. Plus, they lowered the APR to 13.90% and added a 0% intro interest rate until October 2009. Learn more about this card »

Capital One Platinum (Average Credit)

For borrowers with average credit, this Capital One Platinum credit card offers a great regular interest rate of 8.90% and a no-fee 0% balance transfer offer until February 2009. There’s a $39 annual fee, but it’s still a deal if you’re carrying a balance at a higher rate. Learn more about this card »

Looking for different rates or rewards? Compare more Capital One cards »

Great question, Brittany. Sorry to hear about your job, I know it’s tough times down there in the New York financial world. Congrats on your good credit, though, and for having the integrity not to “fudge” your income on a credit card application. Your plan to swap that balance to 0% APR for a year sounds like a good one. Here are my thoughts.

First, a short answer: Estimate what your gross (before tax) annual income will be on your 2008 tax return. Include your year-to-date income from your old full-time job and your full-year part-time income and a reasonable estimate of what you expect to make temping or at a new job. That’s 100% honest, and it should be plenty for Chase to approve your application.

Here’s a longer explanation: Credit card companies ask for your income on card applications to decide how much of credit line to grant. Interestingly, they don’t require proof of this income; they just take your word for it. This is actually a rather sinister tactic. Why?

Credit card companies want to grant as much credit (especially to credit-worthy borrowers) as they can. That’s because the more debt cardholders rack up (and successfully pay off), the more the credit card companies earn.

If, however, somebody falsifies his or her income on a credit card application, receives a large credit line, maxes it out, and the credit card company has to sue the cardholder to collect the debt, the credit card company will use the annual income the borrower provided on the application as proof that the company lent a prudent amount to the debtor.

While credit card companies are far from innocent when it comes to deceiving customers about the terms of their loans, things are not going to go well in court for a debtor when it comes out that his or her annual income was inflated on the credit card application.

This is why credit card applications often have a line for alimony or other additional income. The application then says something like: “Include additional income only if you want it considered for the purposes of determining your ability to repay this debt.”

That said, you don’t have to be employed full-time at the moment you apply for credit in order to list your estimated annual income honestly by estimating what your income will be on your next tax return. Credit applications do, however, ask for your current employer and, sometimes, your previous employer. You can feel free to list self-employed or a temp agency. Although this shouldn’t affect applicants with good credit, applicants with less-than-ideal credit may have a harder time getting approved for new credit without being able to list a full-time job.