Tag: AMERICAN EXPRESS

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Credit Cards

What’s the Difference Between a Charge Card and a Credit Card?

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If you’re shopping around for your next credit card, chances are you might come across a charge card. It can sometimes be difficult to know the difference unless you know the telltale signs. And if you choose the wrong kind and don’t use it correctly, you could end up in a world of financial trouble.

Charge cards aren’t too much different from credit cards, but there are a few key things you need to know.

What is a charge card?

As with a credit card, you use a charge card to make purchases and pay the balance off later. Here’s the biggest difference: Unlike credit cards, which let you keep a revolving balance from month to month, a charge card requires you to pay off the balance in full by your bill’s due date. You cannot make a big purchase and pay it off over time.

Charge cards also have no preset spending limit. This doesn’t mean that it has no spending limit. Rather, your actual spending limit can change quite often depending on how much you’re using the card, if you have any late payments on your record, etc.

At MagnifyMoney, we recommend you always pay off your credit card statement balance in full each month. If that’s something you already do, you’d find using a charge card is pretty much the same as using a credit card. However, there are a few differences that might make you want to choose one type of card over the other.

Pros and cons of using a charge card

Pro: You’re required to pay off the balance in full

One of the biggest advantages of a charge card is that you are required to pay it off in full each month. If you’re the type of person who has a hard time maintaining the discipline to do this normally, using a charge card might force you to develop this good habit. And because you will pay off the balance in full each month, you’ll never pay any interest charges and you won’t rack up any debt.

Con: You’re required to pay off the balance in full

Paying off your bill in full each month is a huge advantage, but it can also be a disadvantage. Yes, it’ll keep you out of debt, and you won’t have to pay interest charges, but if you’re relying on the card as a source of emergency funds, you’ll be better served with a credit card that’ll let you carry a balance from month to month if a very expensive emergency pops up.

Pro: Many charge cards come with a smokin’ hot rewards program

For example, as of this writing, the Platinum Card® from American Express gives you $15 in Uber credits each month (plus a $20 bonus in December), a $200 airline credit each calendar year, and a 60,000-point sign-up bonus if you spend $5,000 within the first three months, among numerous other perks. There are, of course, credit cards that offer similarly attractive rewards.

Con: Charge cards often carry high fees

Again, we’ll use the Platinum Card® from American Express as an example: It carries a $550 annual fee. The cheapest card from Amex is the American Express® Green Card that has a $95 annual fee, though Amex waives it the first year. And if you make a late payment or fail to pay your bill in full? You could be slapped with a late fee of (up to $38 on the aforementioned Platinum Card), and it’ll go down as a negative mark on your credit report.

Con: There aren’t a lot of charge-card options

You may be sensing a trend — American Express is among the last major credit card issuers to offer charge cards. That means your choices of charge cards are already limited — you can choose from just three cards: American Express® Green Card, the Premier Rewards Gold Card from American Express, and the Platinum Card® from American Express. American Express isn’t as widely accepted as Visa or Mastercard, so you’ll want to make sure you have a backup when you’re out shopping, just in case it isn’t accepted.

Pro: A charge card helps you build credit

Charge cards can also help you build credit, and you don’t need to go into debt to do it. As long as you pay on time, the account will be listed on your credit report as an example of your positive payment history — the most important aspect of your credit score. And for newer scoring models, charge cards won’t affect your credit utilization ratio — the second most important factor in determining your credit score. That’s because American Express reports its charge cards as “open” lines of credit, as opposed to a revolving line of credit, and FICO does not factor open lines of credit into its credit utilization calculation.

But that’s not always the case. Rod Griffin, the director of public education at Experian (one of the major credit reporting agencies), said some credit scores treat open credit lines like revolving accounts. “Newer scoring systems are more likely to differentiate between the two than older credit scoring systems,” he said. “Your credit report almost certainly will not show a zero balance for the charge card if you use it and could affect your utilization rate.”

With newer scoring models that don’t factor open credit lines into your credit utilization ratio, that means making a big purchase (and paying it off at the end of the month) won’t have any effect on your credit score, nor will it lower your credit utilization ratio if you have other credit card debt. (A credit card also helps you build credit, but you may find yourself tempted to carry a balance.) Checking your credit score regularly will help you understand how your charge card use affects your credit standing.

Con: A changing spending limit can be bothersome

If you want to make a big purchase or it’s getting toward the end of the month, the only way to know for sure if you have any credit left is to log in to your account and check. Still, you shouldn’t be using your charge card willy-nilly to buy Learjets and mansions anyway, so as long as you keep your spending under control, it’s unlikely you’ll go over your limit.

The bottom line

Charge cards do have their quirks. But as long as you keep your spending within a reasonable range for your lifestyle and pay off your bill in full each month (as you should do with a normal credit card anyway), a charge card can be a useful tool in your financial arsenal.

Lindsay VanSomeren
Lindsay VanSomeren |

Lindsay VanSomeren is a writer at MagnifyMoney. You can email Lindsay here

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Review: American Express Personal Savings High Yield Savings Account

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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There’s no question having a savings account is necessary to get your financial house in order. Savings accounts are great for storing your emergency fund, planning for upcoming purchases like travel or special events, and more. But it can be frustrating to earn little interest on your money while it’s sitting in a savings account at a physical bank, which is why many people have turned to online banks where interest rates on savings and checking accounts are typically higher.

Online banks are able to offer higher interest rates on savings and checking accounts because there are less overhead costs than for brick-and-mortar banks. One online savings account option to consider is an American Express Personal Savings High Yield Savings Account.

American Express Personal Savings High Yield Savings Account Overview

The American Express Personal Savings High Yield Savings Account currently offers 1.15% annual percentage yield (APY). However, this interest rate is subject to change without notice, which is pretty typical for most online banks. There is no minimum deposit required to open an account, but the funds must come from an external account under your same name held at a different bank. Your initial deposit must be sent within 60 days of being approved or your account will be automatically closed.

There are no monthly maintenance fees associated with this savings account, and you can link it to more than one financial institution or current bank account to make deposits and withdrawals.

Funds are FDIC insured up to the legal limit. 

Making a Deposit into an American Express Personal Savings High Yield Savings Account

Once your account has been opened and initially funded, you will need to link any other external checking or savings accounts to your American Express Personal Savings account in order to transfer funds electronically. External accounts must belong to you and have the same ownership as your Personal Savings account. After you have entered your account information to link it, you will be sent test deposits of small amounts to verify your information is correct.

Funds transferred electronically are generally available within five business days.

In addition to electronic transfers, you can deposit physical checks by mail. If you write a check from another bank, make it payable to American Express Bank, write your Personal Savings account number on the memo line, and mail it to:

American Express Bank, FSB

P.O. Box 30384

Salt Lake City, UT 84130

If you send a check made payable to you, sign the back and under your signature write “for deposit only in account” followed by your Personal Savings account number. However, it is more secure to send a check made out to American Express Bank. American Express does not accept cash deposits by mail.

The maximum account balance you can have in an American Express Personal Savings account is $5 million.

Withdrawing Funds from an American Express Personal Savings High Yield Savings Account

A Personal Savings account with American Express is not meant to be used for everyday spending and other transactions, and thus does not come with an ATM card, debit card, or checks. The Federal Reserve Board’s Regulation D allows a maximum of six transfers or withdrawals per statement period for savings accounts and money market accounts within any bank.

That said, withdrawing funds electronically is just as easy as depositing them. You can make transfers to your linked external accounts within your account online. Transfers to external accounts can take one to three business days, if the account is already linked to your Personal Savings account.

Keep in mind internal transfers from one American Express Personal Savings High Yield Savings Account to another will count toward the limit of six withdrawals per month.

However, if you call and request an official check by mail, this will not count toward the limit.

Pros and Cons

Overall, there are more pros than cons with this account. No monthly fees and a higher interest rate on savings is a big pro versus keeping your money in a savings account at a brick-and-mortar bank. Also, there is no minimum required to open or maintain an account. Even with a $0 balance, American Express will not close your account unless it has been inactive for over 12 months.

However, one disadvantage to keeping your money in an online savings account is the waiting period it takes to access your money. It can take one to three business days to transfer your money to an external account. This can be an inconvenience if you are facing a financial emergency, which is why it’s a good idea to always keep a buffer in your checking or savings account in your physical bank.

Alternatives to the American Express Personal Savings High Yield Savings Account

There has been a price war for online savings accounts. American Express offers an excellent yield of 1.15% APY, which is one of the highest in the market. If you want to see how Amex stacks up against the competition, you can see our list of the best savings accounts here.

Who Will Benefit Most from an American Express Personal Savings High Yield Savings Account?

Anyone looking to earn money on their savings will benefit from an American Express Personal Savings High Yield Savings Account. Just remember you are limited to no more than six withdrawals or transfers per statement period, and it can take up to three business days to receive your money in an external account.

Kayla Sloan
Kayla Sloan |

Kayla Sloan is a writer at MagnifyMoney. You can email Kayla at Kayla@magnifymoney.com

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Building Credit

How (and why) to Request a Credit Limit Increase with American Express

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

 

How to Request a Credit Limit Increase with American Express

In this first installment of our multi-part blog series about how (and why) to request a credit limit increase with various banks and financial institutions, we’ll examine how to go about requesting an increase with American Express. Perhaps the most important thing to remember as you read this blog (and subsequent ones in the series) is that when it comes to requesting a credit limit increase with any financial institution, it’s not the how part that matters most – it’s the why. There are good reasons to request a credit limit increase, and there are bad ones, and understanding the difference between the two is critical.

How to increase your credit limit with Barclaycard and Capital One

Why increase your limit in the first place?

Let’s get this out there right off the bat: Requesting a credit limit increase to go further into debt is not a smart thing to do. As you probably well know, failing to pay off your credit card in full and paying big money in interest each month is not a great way to build wealth. So, if you’re requesting a higher credit limit just to borrow more money on non-essential purchases each month, you should probably reconsider.

There are two good reasons to request a credit limit increase. First: you use your card responsibly, want to earn more rewards and do not have enough credit limit. The second (and related) reason is to lower your overall credit card utilization rate. Your credit card utilization rate is a measure of how much of your available credit you use each month. The math is pretty simple – just divide your total credit card balance by your total credit card limit. So, if you have a $5,000 balance and a $20,000 credit limit, your credit card utilization rate is 25 percent. Most financial experts advise maintaining a utilization rate of no higher than 20-30%, across all of your cards.

Lower utilization rate = better credit score

Lowering your credit card utilization rate is important because there’s a strong correlation between your utilization rate and your credit score because it accounts for 30% of your overall credit score. Now, credit scores are based on complex scoring algorithms that take many factors into consideration, so it’s impossible to specify the exact impact of your credit utilization rate on your overall credit score. But what we know for sure is the lower your credit utilization rate, the better your credit score is likely to be, and the easier it will be for you to borrow money at the lowest interest rates. So, going back to the hypothetical example above, if you were to charge the same $5,000 each month, but get your credit limit raised from $20,000 to $30,000, your utilization rate would drop from 25 percent to down under 17 percent. That’s a good thing.

How do banks decide?

Of course, the decision to raise your credit limit isn’t solely yours. Your credit provider has to agree to the request. There’s no great mystery here. If you have a clean credit history, a healthy income (relative to how much you charge each month), keep your monthly balance low, and make your payments on time, chances are you’ll have your request approved. In fact, if you’ve proven yourself to be a reliable borrower over a prolonged period of time, many financial institutions will proactively raise your credit limit without you even having to make the request. On the flip side, if you carry a large balance, have a checkered credit history, and have been inconsistent about paying your monthly bill on time, chances are your lender will be hesitant to increase your credit limit. If you fit into the latter category, you’re best served spending time cleaning up your financial act and proving yourself a reliable borrower before requesting an increase.

Requesting an increase from American Express

The good news is we live in a digital world, one where institutions like American Express have made it fast and easy to request a credit limit increase right online with just a few clicks. Start by logging into your account at www.americanexpress.com.

Step 1

Once you’ve logged in, click on Account Services.

Amex Screen 1

Step 2

Next, click on Credit Management.

Amex Screen 2

Step 3

From there, click on Increase Line of Credit.

Amex Screen 3

Step 4

You’ll then be asked to enter your 4-digit personal code, usually found on the right side of your card, just above your credit card number.

Amex Screen 4

Step 5

Finally, you’ll be taken to a page where you can formally request an increase to your line of credit. Note that you’ll have to enter both your new desired credit limit and your total annual income.

Amex Screen 5

For those who prefer good old-fashioned human interaction, you can also request a credit limit increase by calling the American Express customer service line at 1-800-528-4800.

A few housekeeping items to keep in mind that are specific to American Express:

  • You cannot request a credit limit increase until you’ve had your American Express card for more than 60 days.
  • If your request is approved, you’ll need to wait at least 6 months before you can request another increase.
  • If your request is denied, you have to wait at least 90 days before you can make another request.
  • In order to maximize your chances of approval, it’s generally recommended that the new credit limit you request is no more than three times the size of your current limit.
  • One of the best features of American Express is they don’t do a hard pull of your credit report for credit limit increase requests, meaning your credit score won’t be adversely affected.

Your credit limit was increased. Now what?

Let’s assume all goes well and your credit limit is increased. What should you do next? Ideally, nothing. If you started this process for the right reason – to improve your credit score by lowering your utilization rate – then having your limit increased should have no bearing on your spending habits. Simply continue spending at the same level you were before your limit was increased, and let your credit score reap the benefits.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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How Plenti Points Work

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American Express has launched a new rewards program called Plenti.

It works unlike any other reward program you’re familiar with today because it lets you earn points with several retailers, but you don’t need a credit card to earn them. Think of it like a grocery or drug store loyalty card that works at several different kinds of stores and businesses.

You can earn Plenti points it on top of the cash back or other rewards you’re already earning with credit cards.

Every 1,000 Plenti points is worth $10 or more you can use to save on any purchases at Exxon, Macy’s, Mobil, and Rite Aid. You just use your points at checkout by using your Plenti card or providing your phone number.

How do you earn Plenti points?

You can earn two primary ways:

  1. Automatically earning points by shopping or doing business with companies that participate in Plenti points. You’ll need to register and link accounts to start earning points at some of the businesses, and we’ll talk about that below. You don’t need a special credit card to earn points. Think of it like a frequent flyer card, where you provide the card number to earn points, but still use your credit card of choice or cash to pay for your purchases.
  2. Activating specific offers in advance. While you’ll always earn some Plenti points automatically when you shop at the participating stores, you can earn even more by registering for special deals online. These deals are like coupons that earn you extra points when you buy certain things. You can see these deals here once you sign up for Plenti, or download the app. Plenti wants members to be active, and so they will give you many more points for some purchases if you register for them in advance.

activateoffer

Who participates in Plenti points?

Currently, Plenti points are awarded when you spend money with AT&T, Exxon / Mobil, Macy’s, RiteAid, Nationwide Insurance, Direct Energy, and Hulu, as well as National, Alamo, and Enterprise car rental.

American Express is looking to add a large restaurant chain, grocery store chain, and either Home Depot or Lowe’s to the mix soon, according to Fortune. But it also says any competitor of the existing members won’t be part of the list. So for example Geico, BP, Verizon, Nordstrom, Netflix, CVS, or Walgreens won’t be part of this program.

How many Plenti points will you earn?

This is the ‘magic.’ What you earn will be constantly changing, with special deals and promotions to entice you to shop at the participating merchants. But generally you’ll earn at least one point per dollar you spend at each merchant.

For example, AT&T will offer you 1 point for every dollar you spend on your bill, while Macy’s will offer 100 points after you spend $80. There will also be promo offers like 200 points after your first Exxon / Mobil gas purchase or extra points when you buy certain products at RiteAid.

Where can you register for Plenti?

You can register for Plenti here.

Separately, you’ll want to link your Plenti rewards account with the rewards account at some of the participating stores.

Here are links to connect your Plenti account:

The rest of the Plenti partners don’t require you to link your account – you’ll earn the points automatically when you swipe your Plenti card or enter your card or phone number. Remember, your Plenti card is not a credit card – it’s just a loyalty card like you’re used to at your grocery or drug store, but that earns you some points.

Or put another way, it’s like the frequent flyer card you use with your airline. You don’t use that to pay for your tickets, but you always provide it to earn points.

Where can you use Plenti points?

You can use them to pay for part of your purchases at Exxon, Macy’s, Mobil, and Rite Aid whenever you check out. Just swipe your card, or input your card number or phone at the checkout and you can apply your points to pay for part of your purchase.

What are Plenti points worth?

Plenti points are worth at least one cent each. So 1,000 Plenti points will get you at least $10 worth of rewards at a Plenti merchant.

How can you redeem Plenti points?

You will be able to do some redemptions on the spot at participating merchants, and you will also have online options to redeem.

Do I need a credit card to use Plenti?

No, think of Plenti like a supermarket or drug store loyalty card that lets you earn points when you buy at several different kinds of stores and businesses.

You don’t need to use a special credit card to make your purchases count for rewards.

However, American Express has a Plenti rewards credit card, which lets you earn extra rewards when you use it to pay, and also lets you earn Plenti points when you shop at places that don’t yet offer Plenti points.

I already have a loyalty card with RiteAid or Macy’s. Will I need to carry another one?

No, you can still earn Plenti points when you use your existing RiteAid or Macy’s rewards cards at those stores.

You’ll need to register you account with Plenti to earn the points. You can register your RiteAid account here.

And you can register your Macy’s account here.

What happens to Rite Aid wellness + Rewards?

You’ll still earn wellness+ points to earn discounts of up to 20% off the whole store each year. That hasn’t changed.

But you can now earn Plenti points (these are kept separate), and these Plenti points can be used to pay for purchases you make at Rite Aid. 200 Plenti points = $2 in savings at the checkout counter at Rite Aid or some other Plenti partners.

So you still have the rewards program you’re used to, plus you now earn points you can use to pay for your Rite Aid purchases.

You need to separately register for wellness+ with Plenti to activate earning the extra Plenti points. And you can do that here.

Once you do that, you’ll see the number of Plenti points you earn and have on hand on your receipts when you check out.

Can you still earn airline miles and points?

Yes, Plenti points are completely separate from any rewards you earn with your existing credit cards. They are simply a way to double dip when you shop with certain companies.

But don’t expect you’ll be able to transfer Plenti points into airline or hotel points, as the goal of the program is to redeem with partners of the program. It is possible an airline or hotel program could be added to the list of participating merchants though.

In Canada, a similar program called Air Miles allows you to redeem for travel, though given the American Express Membership Rewards program’s focus on travel, don’t expect Plenti to offer broad travel rewards.

Can I combine these with Membership Rewards points?

Plenti is a completely separate points currency. But you can earn both Membership Rewards points and Plenti points by using a Membership Rewards based American Express card while shopping at a Plenti retailer, just scan your Plenti card alongside it.

Isn’t this a yogurt?

Yes, coincidentally, General Mills just launched a new yogurt this year called ‘Plenti.’ No word on whether there are any trademark disputes…but no relation to the American Express Plenti program.

Is it worth the hassle?

If you shop at Rite Aid or Macy’s a lot and use their rewards program already, then you should definitely register for Plenti and get even more savings. The Rite Aid offers can be lucrative – saving you even more than regular coupons.

For the gas stations, it’s probably not worth the hassle. You only earn one point for a gallon of gas, so you’ll save about ten cents on a typical fill up.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at erin@magnifymoney.com

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American Express Loses Lawsuit

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The bad news continues for American Express. In the last few weeks, they have lost their exclusive relationship with Costco, they lost their JetBlue co-brand credit card to Barclaycard and now they have lost an antitrust lawsuit.

American Express has always charged merchants higher interchange. When you make a purchase at a store with your credit card, the merchant pays a fee to the credit card company, which is called interchange. American Express has historically had much higher fees than Visa, MasterCard or Discover. American Express says that it uses the higher interchange to fund a much more premium credit card experience for their consumers.

American Express sets strict rules for merchants who accept their credit cards. One of those rules prohibits merchants from favoring one credit card company over another. A small store accepting both MasterCard and American Express was not able to encourage people to pay with their MasterCard, even though the costs to the merchant would be lower.

The court believed that these non-discrimination rules prevented competition, and remedies will be launched against American Express in the near term.

Merchants do not like interchange, and they really do not like high interchange. The cost is invisible to customers, but is used to fund the airline rewards and cash back that so many customers receive. Merchants have been increasingly vocal in their attempt to bring down interchange cost, and reward schemes that charge them less.

The popular American Express rewards program, Membership Rewards, is funded by this premium interchange. This court case could hurt American Express in its effort to differentiate itself going forward.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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Why Costco Dumping American Express May Mean Better Rewards

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

costco

Costco and American Express announced the end of their nearly 10 year arrangement that allowed American Express to be the only credit card accepted for payment in Costco stores.

Soon, we will hear which credit card Costco will join forces with when the deal expires next year.

While some American Express cardholders are upset by this, it may be a blessing in disguise.

Case in point, the Costco TrueEarnings American Express card.

It’s heavily marketed to Costco members (some even think it’s the only card you can use in Costco stores, which is not true – any American Express can be used).

And it has some enticing rewards, like…

  • 3% cash back on gas
  • 2% cash back on restaurants and travel purchases
  • 1% cash back on everything else

Those were market leading rewards about 10 years ago, but the reality is the market for cash rewards has become more competitive. And sticking with Amex has meant sub-par rewards for Costco members.

For gas you can get better than 3% cash back rewards from several cards, including the PenFed Platinum Cash Rewards at 5% and Fort Knox Federal Credit Union Visa at 5%.

And for overall spending the Citi Double Cash is a MasterCard that earns 2% cash back on everything you buy. Though today Costco members can use the Fidelitly American Express which earns 2% cash back on all purchases.

The losing proposition would be if Costco switched to Discover.

At the moment it only offers one rewards card, the Discover It, with a confusing array of limited 5% cash back categories each quarter, that often involve merchants that compete with Costco.

Discover management did note on its recent earning conference call it is developing another rewards product, which may have better appeal to affluent customers.

But even if it did launch a new card, Discover would still have significantly fewer reward choices for Costco members than American Express did, or Mastercard or Visa can offer.

So if you’re a Costco member, hope it signs a full deal that allows you to use a range of MasterCard or Visa cards, much like at Sam’s Club where MasterCards are all accepted.

In Canada, Costco stopped accepting American Express, and allowed Capital One to issue a Costco-branded credit card, while also allowing any MasterCard network card to be used for purchases. A deal like that would be a win for members.

Nick Clements
Nick Clements |

Nick Clements is a writer at MagnifyMoney. You can email Nick at nick@magnifymoney.com

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