Last updated: 23/07/2020 | Estimated Reading Time: 4 minutes
American express cards
American express cards are different from normal credit cards in the way that they operate. Many people still don't fully understand the distinction between them and normal cards. This guide will examine the key differences and what the positive and negatives of owning an American Express card are.
In This Guide:
- The origins of American express
- Benefits of American express
- The negatives of American express
- Should you get an American express?
The origins of American express
Most of our normal monetary exchanges happen through our banks, however the banks don't control each part of the process. There are a number of companies that link your banks to payments that you make on your debit or credit cards. These companies are normally payment networks such as Visa and Mastercard, who don't give you a card themselves but instead just help to manage the transaction between the shops and the banks.
American Express on the other hand distribute their own cards, fund the transactions that you make and manage the transfer of the money. This service incurs charges from American Express that come in the form of interest or one off fees. They also receive a fee from shops to process their payments.
Benefits of American express
In the past American Express has been associated with lavish lifestyles and luxury living because of its high credit limit and the various perks that came with owning one. They even have an invite only American Express Centurion card that costs its users over £1,000 every year in fees. This card allows its holders to enter numerous exclusive airport lounges, gold memberships at car rental companies and personal shoppers in luxury retailers. Whilst this image of American Express is still fairly prevalent in modern culture, it has started to broaden its audience to a less exclusive demographic. They now offer no-fee American Express cards that allow you to receive cashback and Airmiles every time you make a purchase. There are other additional extras such as car insurance and holiday insurance. Unsurprisingly, American Express also has an excellent customer service and customer satisfaction record. The top level American Express cards have cashback offers of around 5% on purchases made, on top of giving you Nectar Points and Airmiles.
The negatives of American express
The primary drawback of American Express cards is the fact that they charge companies for the payments that they process. This is because they have their own payment network and don't rely on companies like Visa and Mastercard. This means that some businesses, especially smaller ones, may not accept American Express. In other cases, such as online shopping, you may have to pay a little bit extra in order to use one.
Another thing to be aware of is that American Express' additional extras often only last for a limited period. This means that you won't be able to enjoy the benefits of things like Airmiles or cashback for that long. Most of these offers are introductory offers that expire after a certain amount of time. Some of the offers do last beyond an introductory period but there are often minimum spends that are required in order to qualify for them.
Essentially when taking out an American Express card with nice introductory offers you should bear in mind that after these offers expire the card acts just like a normal credit card. This means that with the higher fees that they charge, you could end up paying more for the card than you save with the offers.
Should you get an American express?
When considering an American Express card it is important to be aware of how you are going to use it and if you are going to get your money's worth out of the extras it offers.
If you get an American Express that comes with car insurance, you will only benefit from this if you don't already have car insurance taken out. Similarly if the card you get allows you entry to exclusive membership clubs, you need to seriously consider whether or not you will ever make use of this feature.
On top of this, it is important to consider whether or not you are going to spend enough on the card to meet the minimum requirements for the offers to apply. If you don't generally spend as much as they need you to, then it is hardly going to be economical to increase your spending just so you can take advantage of these offers.
One more thing that you should consider when weighing up the option of an American Express is the fact that they tend to have higher interest rates than other cards. This is how reward credit cards make the most of their money back from their customers. This means that you should be extra careful not to leave outstanding debts on your card, beyond the interest free period.