In my last post, I wrote about Returning From AMEX Purgatory. After a year on probation with the AMEX Optima card, I am finally eligible apply for other American Express cards. In particular, I was watching a YouTube video that explains that you can typically receive one AMEX credit card and two AMEX charge cards every 90 days. The top limit on these is 4 credit cards in total and 10 charge cards in total.
Given this information, I decided to apply for the American Express Business Gold card. This is a card that I had before my financial situation took a bad turn. It isn't as powerful as its big brother, the AMEX Business Platinum card. But, it offers some useful business benefits.
Sure enough, my application was approved. I should receive a new card in a few days. I won't bore you with the benefits of the AMEX Business Gold card. You can see all the benefits on the AMEX website.
Whereas the Hilton Honors Business card approved me for $3000 in credit, the AMEX Business Gold card approved me for $10,000 in Pay Over Time credit. This is the maximum amount of credit that the account will carry over month to month. It usually consists of purchases over $100. Smaller purchases go towards the Spending Limit, which has to be paid back every month in full. This is true for both the business and personal charge cards.
What distinguishes the business card from the personal card, primarily, are the spending categories for Membership Rewards points. In terms of points earning, both cards are work horses. The Platinum cards, both business and personal, are geared more towards a traveling lifestyle. We may eventually opt to upgrade the business card to Platinum once we start to travel more.
While on the topic of travel, one perk the Business Gold card has is a rebate of 25% of points when you use points to book a flight. So, for example, if I use 100,000 points to book a flight, then I would get 25,000 points back. The Platinum card raises the rebate to 35%. Once you start playing the points and miles game, it can get perverse on the perks.
However, since we are now focused on rebuilding and exploring business options, the Gold card is sufficient.
To reiterate the benefits of having AMEX business cards is that they don't report to your personal credit file. All spending and balances on these cards are out of sight for the credit agencies. And, it is not difficult to qualify as a business.
Although, to be fair, having a personal charge card also has advantages for your credit report. These report to your credit file. But, as there is no preset credit limit to charge cards, they don't count towards your percent utilization, which can lower your score.
The AMEX Business Gold does have an annual fee of $295. You may wonder if it is worth the cost. The answer is that it depends on your circumstances. To me, $295 is reasonable to help me improve my credit using the benefits I mentioned previously. On top of that, I do tend to use the perks that come with the card. So, I do get back more than the $295 in value. However, if your whole purpose is to use the card as just any other credit card, you may not extract as much value. It is important to actively explore everything you can do with the card to extract the greatest value from the annual fee.
Having been a previous holder of this card, I do not qualify for the signup bonus. AMEX has a once per lifetime policy for signup bonuses. This is partly the reason why I do not apply for the Platinum. That card has a high spending requirement to qualify for the signup bonus. I am not confident I could responsibly spend that much. However, there is still sufficient value in having the card that a signup bonus is not necessary. And, when the day comes that Platinum is under consideration, there may be no choice than to forego the signup bonus. In the meantime, we can postpone that decision.
Next, I am tempted to apply for a personal charge card. The AMEX Green card seems like it might meet our needs, which will mostly consist of dining and groceries. The $150 annual fee is also more palatable. But, for now, it is unlikely that I would get one. I have other cards that could be turned into daily expense cards. They are just sitting there unused. To reiterate, the advantage of a charge card like the Green card is that spending does not count towards utilization like credit cards. The other cards don't have that advantage.
For now, I'll have to wait for the new card to arrive to transfer over all of my monthly expenses. Things are looking better for our finances.
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I am curious about this statement:
It was my impression that this AMEX card not having a limit was a negative on your credit score, when I was working on improving my score two years ago.
Now I am really confused, because you wite so confidently, and I got rid of AMEX to improve mky credit score...
Do you kow if this benefit you describe is the result of recent law? Or credit bureau change in policy or rules?
Thanks
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Good question. As far as negative impact, charge card balances do count against your overall debt. Therefore, other lenders may still take your total amount of debt into consideration despite having low utilization. Just to be clear, AMEX also has regular credit cards that do report utilization. In this case, we are talking about their charge cards, Green, Gold, and Platinum.
I have only been at the credit card game since about 2018. In my limited experience the lack of impact on utilization has always been true. I don't know if things were different in the past.
Here is an article that goes into more detail:
https://thepointsguy.com/news/how-charge-cards-affect-credit-score/
Charge cards are not without problems, particularly if you are on a plan to pay down debt. First, charge cards don't incentivize you to change your behavior. As you can continue using one with little impact to utilization, you may not reduce your spending, which reduces the amount of free cash flow to pay down credit cards carrying a balance.
Another problem with charge cards is that they require paying off every month. If you have a cash flow crunch that causes you to miss a payment due date, this can affect your credit negatively. This is true of all cards, except that charge cards require payment in full, while credit cards only require the minimum payment. Therefore, you're more likely to get into trouble with a charge card. I've been down that road.
Charge cards aren't good at all for velocity banking, which speeds up how fast you can pay down debt. In my experience, balance transfer cards are the best as they allow you to dump your paycheck onto the card to lower your average daily balance. In this way, you lower your interest cost. Thus, you can pay off the total balance faster.
Ultimately, it may not have been detrimental to avoid charge cards while you were on a debt reduction plan. Although, this is for entirely different reasons than your utilization ratio.
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#shortsegments
#smallbites
#lalai
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