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.

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?

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.