I recently received an offer for a Premier Rewards Gold charge card from American Express, and despite its $195 annual fee, I nearly applied for it. American Express offered a generous 50,000-point sign-up bonus worth up to $500 if I spent just $2,000 in the card’s first three months, an annual $100 airline fee credit, a solid triple-point bonus on air travel and a double-point bonus on gas, restaurants and groceries – pretty good for a mid-tier premium rewards card.
But the card’s disappointing lack of transparency over its extended payment feature – which allows you to use the charge card as if it were a credit card – turned me off.
Because American Express charge cards don’t disclose the interest rates charged by American Express’s Pay Over Time program until you already own the card, you can’t intelligently compare it to similar rewards cards. If you think you might want to occasionally pay for select purchases over time using your charge card, you just have to hope you’ll be dealt a reasonable interest rate.
A charge card/credit card hybrid
Unlike traditional credit cards, charge cards typically require you to pay your balance in full each month. As a result, the Schumer boxes listing details of charge card offers don’t list an APR. But some charge cards, such as the American Express Gold card, offer a convenient workaround to select cardholders called Pay Over Time that lets you delay full payment for certain purchases over $100.
For example, the “Extended Payment” feature automatically rolls over eligible purchases over $100 to a separate Pay Over Time balance that collects interest, while the “Select and Pay Later” option lets you manually choose which high-dollar purchases you want to pay for over time.
Similarly, the “Sign and Travel” option automatically moves airline ticket, rental car, hotel, cruise and international purchases to a separate interest-collecting balance, turning your American Express charge card into a de facto credit card.
But unlike traditional credit cards, charge cards don’t advertise the APRs cardholders have to pay if they enroll in such a program. Instead, the Gold card’s initial disclosures note that eligible cardholders may be able to pay for certain purchases over time, but the disclosures don’t reveal the price you’ll have to pay to roll over your balance.
When I called American Express for more information, the card issuer wouldn’t even give me a range of possible APRs. I would have to apply for and be approved for the card before I could find out how much it would cost to borrow on the card.
An American Express customer service representative said that the Pay Over Time service is by invitation only, so not all charge cardholders can take advantage of it. Once card members receive an invitation, they will be notified of their APR.
She then asked me if I was still interested in applying for the Premier Gold Rewards card. But why would I apply, if I have no idea how much more expensive it would be to borrow on this card than a similarly rewarding competitor?
I doubt I’d ever want to carry a balance on the Gold card, but if I did, I’d want to know before I applied for the card how much rolling over certain purchases would cost.
With extended payment, charge cards are just as dangerous as credit cards
For cardholders who don’t want to rely on more than one card, signing up for a charge card such as the Premier Rewards Gold card expecting to be approved for the extended payment benefit is risky. The interest charges for Pay Over Time balances could be a lot higher than you think.
Several rewards bloggers, for example, have posted about being offered additional American Express membership rewards points in exchange for enrolling in Pay Over Time. But the APRs they received after being invited to the program were surprisingly high.
For example, Danny the Deal Guru was recently offered an 18.74 percent APR to add flexible payments to his American Express charge card. Similarly, Shawn Coomer of Miles to Memories was offered 18.49 percent last year. The average rewards credit card APR, by comparison, is currently 15.81 percent.
There’s no way I would enroll in the Gold card’s Pay Over Time feature if I was offered an APR that high – which perhaps is why American Express is so secretive about it.
The flexible payment option is a nice perk for cardholders who are worried that a charge card might be too restrictive, but once you’re finally allowed to read the fine print, you may find that Pay Over Time isn’t nearly as good a deal as it seems.
See related: Credit cards rate ranges make comparison shopping difficult