Do you have to pay off the balance each month with American Express?

Getting into the finer details, is another story. American Express cards may or may not have a preset spending limit. What this means is either you have a set limit, for example $10,000, which is the limit you can spend per month, or no pre set limit, which you can charge as much as you want. Most Visa and Mastercards have a preset limit, however, a few select cards do not. Most American Express credit cards with no pre-set spending limit require you to pay the balance off each month.

American Express Rewards Program

When it comes to rewards, American Express is known as the pioneer of rewards cards, and have some of the best rewards a credit card can offer. This is one of the most appealing bullet points of American Express. Because of their excellent rewards programs, it is more likely that your credit is in the excellent category.

I want to apply for an American Express Card

Before you apply for an American Express card, you can compare American Express cards. That way, you can review all the fine print, find the American Express card that is most suitable to your spending habits, and get the most rewards out of your American Express card.

A fixed rate is simply that, a rate that is fixed at a certain percentage. Your card may have a fixed rate of 15.99%, when the CARD act goes into effect, credit card companies cannot change this without giving you a 45 day notice, at which during that time and up to 2 billing cycles later, you can cancel your card and pay off your balance at the fixed rate you had before the notice was mailed out.

A variable rate is tied to the prime rate and moves up or down as the prime rate moves, this gives credit card companies an opportunity to get more interest charges, as the prime rate is expected to rise.

Lower Credit Lines

Credit card companies have already lowered millions of customers credit limits, not only to protect them from higher risk, but because the CARD act allows for the customer to have a fixed limit that cannot be exceeded.

Inactivity Fee

Banks are charging an inactivity fee for customers that don’t use their card, this also includes cards that have no balance on them. Also known as a dormancy fee.

Increased annual fees, late fees and interest rates

Because the CARD act states that a credit card cannot raise interest rates in the first year a card is opened, and must give a 45 day notice of a rate increase, along with the right to cancel. Credit card companies are increasing fees and interest rates now, before the law goes into effect. One thing the CARD act of 2009 does not include is a cap on interest or fees. Banks are also adding fees like a “printed statement fee” for consumers that receive their statements in the mail vs online or electronically.

These changes seem to impact the consumer negatively, which so far it has, and has been shown to have happened in the past, (ie Australia). However, there are some good that will come out of this.

• You will have the same payment due date every month, which if it falls on a holiday, they extend this to the next business day, this was done to avoid due dates falling on weekends or holidays.
• Credit card companies must mail out statements 21 days in advance (currently the mimimum is 14 days)
• You have the right to cancel any interest rate hikes, and keep the terms prior to the hike, to pay back your balance. You get 3 billing cycles to decide if you want to cancel.
• Credit card companies cannot raise rates, to customers in good standing that are unrelated to the cardholders behavior (gets rid of the “universal default”)

Remember to review the card act, anytime you think something doesn’t seem right with your credit card. If you receive a fee, or charge, it may be protected after Feb 22, 2010.

Credit Unions are much, much lower when it comes to fees and interest rates, as compared to the “big banks”. But when it comes to rewards credit cards, credit unions have some competitive cards. Pew Charitable Trusts did a study on Credit Union credit card rates, and they found that the interest rates are 20% lower than the major bank credit cards. In addition, overlimit fees are around $15-20 as compared to $35-40 for major banks.

If you would like to compare some of the major banks credit card rewards programs, to find out if the higher fees, result in better rewards perks, compare rewards credit cards and apply online if you find the right card.

Cash Back Rewards Credit Cards

Probably the consumers favorite, who doesn’t like getting cash back? Cash back credit cards offer anywhere from 1% up to 20% currently for purchases. Typically the higher percentages are for purchases made through online partners, and are purchased through the creditcards’s online mall. Many of the cards will offer 3-5% on special purchases either made during certain times of the year, or reward you based on your most popular categories of purchases. Cash back rewards are typically mailed to you as a check, a statement credit, a loadable visa/mc, or deposited directly in your account.

Travel Rewards Credit Cards

These cards are recommended for frequent travelers. Rewards are usually in points or miles, which are redeemable for free hotel stays, free airline tickets, free cruise lines and other travel benefits. Most points or miles are based on a 1 point/mile per dollar spent, with the ability to earn bonus miles on special purchases or buying from parters. These cards many times will have an annual fee (but not all), so make sure the rewards are worth the fees. The best travel rewards cards have no annual fees, no blackout dates, no limit to points/miles earned, no expiration, and the ability to use any hotel/airline/cruise ship.

Gas Rewards Credit Cards

Gas rewards cards normally offer cash back or discounts on the price per gallon at the pump. There are many gas cards that are specific to the company they represent. For example, the BP Gas Card gives a much higher rebate at their pumps than at an Exxon gas station. It is recommended that, like the travel rewards credit cards, you look for a card that isn’t taylored specifically to an individual gas company, but a Gas Card like the Discover® Open Road Credit Card, or the Chase Freedom Card.

There are many varieties of rewards credit cards to choose from, and after reading the above articles about some of the rewards cards offered, hopefully you will be able to make an informed decision on what type of rewards credit card that works best for you.

I have cards for Macys, Sears, Best Buy, Kohls, Target and Dillards. I can get 10-15% off when I use my Macys card, which really doesn’t matter, when the prices are about 25-50% higher anyways. Sears, Kohls, and Dillards really don’t offer much incentive to use the card, but I do like the Best Buy RewardZone rewards program. All in all, I really don’t see any reason to keep any of these cards except for the Best Buy card.

The credit limits aren’t much either Target $200, Kohls $1500, Dillards $300, Macys $2100, Sears $1300 and Best Buy $3700. Closing these accounts wouldn’t have as much negative effect on my credit report as say a $10,000 or $15,000 card.

It does get overwhelming when you have too many rewards credit cards. I have a Bank of America Cash Rewards Signature card, Discover Miles, US Air World MC, Pentagon Federal Platinum Cash and Travel Rewards cards. It is almost getting to be a headache debating between cash, points or miles. The credit limits are pretty decent on the cards, so I will not close them, this will negatively affect my credit score.

Best advice for all you people wondering about if and when you should ever cut up and close your credit card accounts. Short credit history, with small balances are the best bet for doing so with little impact on your credit score. If you have higher credit limits and a longer credit history, keep them open, and maybe charge a tank of gas or a grocery trip on each every quarter to keep them active. If you are not earning any rewards on them, get rid of ‘em, all banks are pushing rewards in this day and age.

An example of a free flight from Southwest airlines

If you have a checking account, a mailbox, or the internet, you will see that credit cards are upping the ante with rewards. Cash back rewards, airline miles rewards, gift card rewards, hotel rewards, and the list goes on. Which card should you choose and how can you make sure you maximize the rewards you can earn on the card.

When choosing a rewards card, lets limit the choices down. Do you travel a lot? If yes, keep in mind a travel card, if not, stay away. Do you drive all the time? Then a gas rebate credit card works for you. How about grocery shopping, if you shop a lot, cash back rewards might be your fit. Just use some common sense when selecting the type of rewards bank card.

Maximizing your rewards

The best way to earn the most rewards the fastest is to pay for everything with the card. Pay your bills, buy your groceries, order Subway/McDonalds/Burger King etc, fill up your tank etc with your rewards card. Most importantly, make sure you pay off your full balance at the end of the billing cycle. Paying finance charges on balances will offset any rewards you are trying to earn.

What to watch out for with Rewards Cards

Many rewards cards try and get you with annual fees, and higher interest rates. Always be aware of the full disclosures for the rewards credit cards before you apply, there are several rewards programs that have a low APR and no annual fee.

If you follow the simple guidelines above, you can enjoy a free roundtrip ticket, a hotel stay, a relaxing cruise or extra cash back, all from your favorite rewards Visa, Mastercard, Discover or American Express card.