For many years, I used an American Express charge card—not a debit card, credit card, or cash—for 95 percent of my purchases. Today, my wife still uses an Amex Premier Rewards Gold Card for most of her personal purchases.
AMEX CHARGE CARDS COMPARED
| Green | Gold | Platinum | Centurion | |
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| Fee | $95 | $175 | $450 | $2,500 |
| Rewards | Membership Rewards. | 3x points on airfare, 2x on gas/groceries, 1x on all else. | Membership Rewards, concierge service, airline lounge access. | VIP concierge service. |
| Apply | Learn more » | Apply here » | Apply here » | Invitation only. |
Why use a charge card?
And how is a charge card different than a credit or debit card, anyway?
WHAT IS A CHARGE CARD?
Paying with plastic has been around for decades, but long before we all carried credit cards or debit cards, American Express and a few other companies offered charge cards. Charge cards worked then—and work now—just like today’s credit cards with one big difference. On a charge card, you don’t have a pre-set credit limit, and you CAN NOT pay only a fraction of the balance due at the end of the month (like you can with a credit card)—you must pay the entire balance every month. Of course, that means that you don’t pay interest, either.
Because American Express charge cards provide all the benefits of a credit card—convenience, rewards, fraud and purchase protection, etc.—with this one vital difference—in my opinion they provide a smarter way to manage your money than debit cards without the risk of getting into a huge debt you can’t repay.
(In the event you charged a balance on a charge card you couldn’t pay off by the due date, they would just shut your account down until you paid it. Compare that to credit cards, where the issuer actually hopes you’ll rack up a big debt that takes months to repay so they can charge you interest.)
CHARGE CARDS VS DEBIT AND CREDIT
The following table shows you, very quickly, the big differences among charge cards, credit cards, and debit cards.
| Charge Cards | Credit Cards | Debit Cards | |
| Charges Interest | No | Yes | No |
| Fraud Protection | Yes | Yes | Some |
| Purchase Protection | Yes | Yes | No |
| Rewards Points | Yes | Yes | No |
| Can Lead to Debt | No | Yes | No |
| Builds Credit | Yes | Yes | No |
| Annual Fee | Yes | Some | No |
WHY USE A CHARGE CARD OVER A DEBIT CARD?
American Express charge cards do 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 Card for most of my purchases is that the card is not linked directly to my checking account. In fact, debit cards kind of scare me.
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.
Why Don’t Charge Cards Have Spending Limits?
American Express charge cards advertise “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. American Express cards do, in fact, have spending limits. They just change as your financial situation changes.
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 should never 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.
CARDS TO CHOOSE FROM
The Premier Rewards Gold Card
The card I used for many years is American Express® Premier Rewards Gold Card.
This gold card offers Membership Rewards and benefits like purchase protection and travel insurance. You’ll earn 15,000 Membership Rewards bonus points when you spend $1,000 in your first three months of card membership, as well as 3x rewards on airfare, 2x rewards on gas and groceries and 1x rewards on everything else. There’s also a bonus of 15,000 points if you spend $30,000 in a year. That makes this card great for big spenders, although expensive for everybody else. Although I loved using this card while I was still repaying debt (it let me enjoy the benefits of credit cards without the temptation of backsliding into debt again), I eventually decided that, based on my spending patterns, this card’s rewards did not justify the fee.
The Platinum Card
Finally, if you’re a frequent traveler, want a little bling in your pocket, and don’t mind paying $450 on the annual membership, the The Platinum Card® from American Express may be the answer. This card provides a concierge service, access to most airport lounges, and a host of other elite benefits that may be attractive to travelers and big spenders.
As the disclaimer below suggests, I’m a member of the Amex affiliate program, meaning I earn revenue for referring new cardmembers. I do NOT, however, recommend every credit card or product that makes me such an offer…I have used and personally recommend charge cards for what they are, but in making your decision, want you to know all the facts!
Disclaimer: This content is not provided or commissioned by American Express. Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through the American Express Affiliate Program.
I'm David Weliver. At 26, I had NO savings and NO financial plan. I was maxed out, stressed out, and fed up. Then, I changed. I repaid $80k of debt, tripled my income, and bought a home. I'll show you how to get similar results. 
I did read somewhere that AMEX is making calls on their customers (now) to ask them to make additional payments.
Personally, I prefer Mastercard
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.
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.
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.
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.
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.
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
Thing is, if you pay off your credit card monthly, there’s no interest on those charges either. That said, if you’re disciplined enough to spend as much as you can pay AMEX at the end of the month, you’re disciplined enough to pay MCard, Visa, etc…
NOTE:
credit cards = Mastercard, VISA, Discover = charge limit
charge cards = American Express . . . . . = “no” charge limit
With rewards (points) cards of their own, redeemable to cash certificates hotels or air travel, credit cards seem to have the advantage. Namely, no annual fees.
Unless holding an AMEX (with “no” charge limit) is better for your credit score than holding a credit card, there’s really no reason to pay the extra annual fee for an AMEX (green or gold) IMO.
EXAMPLE:
rewards AMEX allows max charges of $9000
(when calling in about a large purchase)
The credit limit on your rewards Visa/Mastercard/Discover is $9000
(no need to call in for purchase this large)
Advantage Credit Card because there’s no annual fee and your
disciplined enough to only make this purchase knowing you will pay it
in full to avoid interest on the remaining balance. If you don’t,
interest on the remaining balance will be higher on a credit card than
a charge card — this is a situation the disciplined user whether
charge or credit does not get themselves in.
In closing, my question is simply this, if you must have one or the other – is possession of a charge card better for your credit score than possession of a (high credit limit) credit card?
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!
I use AMEX too. I think it’s the best card out there! And their customer service has always been helpful and friendly. They truly do put the customer first, which is why a lot of businesses don’t take the card.
i want to know what happens if you dont pay it all at end of the month ?
Do they still give an extra 10,000 points at renewal? I remember they used to do that and you could trade for a gift card which was about the same as the annual fee. So that balanced out. I was an authorized user a while back and now i’m thinking about getting my own.
There is never a reason to pay an annual fee for credit (charge card – or – credit card) unless there are no other cards on the planet that don’t charge an annual fee. I think there are. So, basically, you’re only fooling yourself if you do. There is no justification except to fulfill your gratification over your sense of prestige. If you think you are THAT important, then by all means, pay the fee.
To a point I agree with J that the card fee is perhaps a bit old world. Amex would do far better on the Green Card to have no annual fee, that would attract so many more people.
It is worth noting though that some countries such as Germany have fee free Amex charge cards. The only catch is you need to bill over a certain value per year, if you as I do travel a fair bit this is often easy to do.
But if they dont charge a fee, and u pay back in full every month how will they make their money besides the fees that they charge the vendor?
if i get a charge card and never use it will they charge me for anything or deactivate my card?
Hi,
I’ve had all sorts of credit cards but never an American Express. After a few decades of debt I finally paid it all off about 4 years ago and have only been using a debit card since. With the credit cards I was able to rack up an obscene amount of bills and debt that was way over what I could manage. It happens faster than you realize. Even charging for little things like coffee, or a book here and there adds up.
However no worries, they don’t make you pay all at once. For that “favor” they will tack on some additional fees. All your little purchases end up costing way more than if you’d just paid in cash. You think Starbucks is expensive now? Pay with a credit card and pay over the course of a month or two. How expensive would that coffee be if you could only afford to pay the minimum payments, basically the interest (which is what they want of course). It got to where I could only afford interest only payments for 4 or 5 cards and each card was between $150 and $350. It just added up to too much. Interest only means the actual debt is never paid off, so this is just treading water rather than solving the problem. Of course you can only do this for so long. And if you miss one of these payments, guess what? More fees.
I see the advantage to a proper Charge Card like Amex in terms of you can’t get in too deep. It’s sort of a safety net. It’s easy to talk about how if you can pay off before the month is out then why not just pay off the Credit Card monthly and avoid the interest. That works for a few months, maybe forever for you. Congratulations. However that’s making the naive assumption that nothing will change. Everything changes. Life’s full of surprises. It only takes one skipped pay check or some surprise emergency to throw your budget off. And it’s a slippery slope my friends. It’s designed to be. Credit Cards and banks make money when you are in debt. So they encourage that scenario.
What I want to know is what’s the advantage to American Express? How do they make money here?
Also will having and using an American Express card help or hurt my credit score? I don’t understand the comments above. They seem to go back and forth under certain conditions.
For those who wonder what the penalties are for paying late or if there are any for not using the card, why not simply call Amex and ask them?
Hello,
,
To quickly answer a couple of your questions, I think that compared to a debit card, the advantage of a charge card (Amex is the only one in the states to offer them, I believe) is debatable.
With Amex you get an “extra layer” of protection if you have a dispute with a merchant or you lose your card. In other words, if your card gets stolen, the money’s not coming out of your bank account. You can also use a charge card to manage your monthly spending even if your checking account goes up and down—but you don’t worry about going into long term debt.
Amex makes money from the annual fee on these cards but also from the interchange fees they charge merchants every time you use your card.
Finally, as to credit scores…these cards do not HURT your credit score, they just may not HELP as much as a credit card with a high credit limit. With the sole exception, perhaps, of somebody starting out trying to establish credit, I recommend deciding on whether a charge card is right for your spending habits rather that what it might or might not do to your credit.