One Brilliant American Express

Have a Great Christmas Day!

From the company that convinced you to always keep an extra Travelers Cheque in your wallet comes “One”. One is an American Express (AXP) credit card with an FDIC insured savings account attached. First, you gave them an interest free loan by never spending your last Travelers Cheque. Now they’re getting you to lend money to yourself while they collect the spread.

Here’s how it works. The first year is free, and then they charge you a $35 annual fee. $50 is deposited into your savings account after your first purchase and 1% of all purchases are deposited into your savings account. The savings interest rate is variable, quoted as 4.5% as of 12/04/07.

The BIG Print Page says you can pay over time with no interest on new purchases. I don’t know what that means. First the APY is stated as 13.49% to 15.49% after the grace period (30 days), depending on your credit history. Then they tell you the APY is variable at 5.99% over prime. If you default, your rate jumps to 21.99% over prime (29.49%) for 12 consecutive billing periods. There are many ways to default – be careful.

Let’s review, American Express is paying you 4.5% and charging you at least 13.49%. Sounds to me like you should get a free credit card and keep your savings elsewhere.
The details.

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