Earn Cash Back, but Read the Fine Print Carefully
Written: Mar 14 '00
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Product Rating:
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Pros: Plenty of cash back for big spenders
Cons: Light and medium spenders can earn more with Discover
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| ErgoPropterHoc's Full Review: American Express - Cash Rebate Card |
Other writers have vaunted the American Express Cash Rebate Card, calling it better than Discover - at least in regards to the cash rebates. But you have to read the fine print carefully in order to understand what's going on.
The American Express card advertises that you can get up to two percent cash back on your purchases. In order to achieve that rate, you have to carry a balance from month to month (which earns you .5% cash back). That extra cash back is more than lost in the interest charges you'll likely incur at around 18%, after any introductory rates you get (which are still going to be greater than .5%) wear off. In addition to carrying a balance, you need to charge in excess of $5,000 annually on the card (which earns you 1.5% cash back) to achieve the advertised 2% rate. For spending below the $5,000 threshold, you only earn .25% for the first $2,000, and .5% from $2,000 to $5,000.
Compare that with the Discover card, which only promises a return of up to 1%: no part of that reward is contingent on carrying a balance, and you begin to achieve 1% cash back after just $3,000 in purchases. Below that threshold, you earn .25% on the first thousand, .5% on the second thousand, and .75% on the third thousand. You ramp up much more quickly with Discover than with American Express. [Note: Beginning in May, any purchases at Price Club, Sam's Club or similar warehouse stores will only earn .25% on your Discover card. At least at Sam's that's still better than the American Express card, which they don't even take.]
Doing the math, and assuming that you pay off your entire balance each month, you need to charge at least $8,000 per year on the American Express card in order to be better off than using the Discover card. (That's about $666.67 a month.) If your annual credit card usage will tend to exceed this threshold, as it likely might if you use the card while travelling on business, the the American Express is the Card for you.
As an additional note, I'd point out that the Platinum Discover Card comes with the opportunity to exchange your cash back for double the value at a few selected merchants. If you tend to use one of the selected merchants (such as Blockbuster) anyhow, then you can easily make out much better with the Discover Card. The Platinum card does require a higher credit limit, but if you qualify, you should probably upgrade.
Setting the cash back issue aside, the American Express card tends to do relatively well with customer service. I've always found their telephone operators courteous, and rarely have had to wait on the phone long. In regards to card acceptance, the American Express is probably the worst of the major credit cards you can get. It is generally accepted at most upscale places, and frequently accepted elsewhere, but there's still a lot of places you can find, especially in the 'budget' end of the spectrum, that won't take your card. (As well as Sam's Club, which I mentioned before.) As others have written in their reviews, sometimes you can't use it when you really, really need to. So I'd recommend keeping another card in your wallet too, if you're going to try and rely on your American Express.
Also, I'll note here, the card's web site might seem nice, but it seems silly that it's pretty much totally independent of American Express' other on-line financial offerings. If they could really integrate the card with banking and brokerage, I'd probably lean towards using the whole package more.
Recommended:
No
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Epinions.com ID:
ErgoPropterHoc
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Location: Evanston, IL
Reviews written: 71
Trusted by: 66 members
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