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PrintCharge Cards: American Express Offers an Attractive Alternative to Credit Cards
Credit October 6th, 2008I use an American Express charge card—not a debit card, credit card, or cash—for 95% of my purchases.
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:
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.
October 7th, 2008 at 11:43 am
I did read somewhere that AMEX is making calls on their customers (now) to ask them to make additional payments.
Personally, I prefer Mastercard
October 7th, 2008 at 11:58 am
It’s not just AMEX. Last month Citi offered cardmembers a 10% credit on any amounts they pay toward their credit card balance over the minimum balance for the next four billing cycles, up to $550.
All credit companies are hurting for cash and will be taking steps to reduce their risks in the coming months.
October 7th, 2008 at 3:34 pm
While I do carry a Green card (as an authorized user on my father’s account… I’m a college student and wouldn’t be able to get one otherwise.) I also carry the Blue card, since AMEX does a bad job of reporting “limits” on their charge cards.
On your credit report, the credit limit on the charge card is listed as the highest ever balance you’ve had on the card at the end of a statement. So unless you make a one-time large purchase (TV, laptop) in addition to your regular monthly spending, AMEX makes it seem to the credit bureau’s that your using a very high amount of your credit, which hurts your Credit Utilization ratio, which in effect hurts your credit score.
I just wanted to inform people to not cancel all of their other credit lines if they are using a green,gold, platinum, or centurion (in the case of the black card, i doubt they care about their credit score but…) and to keep the lines open to keep your credit use ratio to a minimum.
October 7th, 2008 at 7:05 pm
Good point, Chris. The lack of a credit limit on these cards impacts credit scoring.
Regardless of what card you use, I think it’s a good idea to have one or two credit cards open that you intentionally do not use for the exact reason you describe — keeping your debt utilization ratio low.
Some other cards–even those that have credit limits–report your high balance as your credit limit rather than the actual limit. I heard rumors of Capital One doing this a while ago. Not sure if it’s still true.
Just another reason to monitor your own credit report from time to time.
October 9th, 2008 at 11:50 am
David, what happens if you don’t pay the amount in full one month? It seems like there would have to be some sort of penalty in the chance that there was a missed or late payment.
October 9th, 2008 at 2:17 pm
Good question, Lauren…fortunately I’ve never paid this card late, so I don’t know first hand, but as I understand it:
Every statement comes with a “Please pay by date” that is two weeks after your statement closing date. This is the date they want you to pay by, but I believe you have until the next statement closing date (a full month) to pay the balance in full before anything happens.
If you don’t, there is a late fee that is more substantial than most credit cards–I think it’s 5% of the balance due. Worse, AMEX may suspend your account so that you cannot make new charges until the balance is paid.
October 28th, 2008 at 11:08 am
I have a maex platinium charge card and i would like to know why is the card not able to give cash advances right away from the first month
December 11th, 2008 at 11:38 pm
Interesting reading. I have a charge card with Amex, always paid on time and in full. Had a cheque i sent to pay my bill but it seemed very late in being presented. So I rang them, they said no hadn’t received it so told them i was canceling the cheque and doing internet payment.
Next month received my account with a cheque reversal fee applied, rang them straight away, was assured it would be re credited to me.
Next month a late fee had been applied, more phone calls. Again assure all would be well.
Next month card declined rang them given a reason due to late fee etc,told that all would be well.Go grocery shopping card declined, rang Amex the next day and told that i now have to have 6 months of good payments (my previous years don’t get counted), before they will take of the limit that they have applied and not told me about!!
Customer service - i think they need to take a good look at how they treat their customers, say they sent me a letter, never arrived but no trouble getting the bills!