You probably already know that having a credit card with “no pre-set spending limit,” such as the classic American Express Green, Gold, or Platinum charge cards, does not equate to having no limits. So how is your spending limit calculated, and what happens if you hit it?.
When I used a simple Amex green charge card in the past, I learned what happens when your “not pre-set spending limit” is reached.
Traditional American Express credit cards are charge cards rather than credit cards, so the entire amount you charge to the card is due each month. With these cards, AMEX receives payment from merchant fees it collects for each transaction as well as an annual fee.
Consequently, American Express lets you charge whatever it believes you can afford to pay off each month rather than setting a specific credit limit. To be clear, many of the recently introduced American Express cards, such as the Blue Cash and Everyday cards, are credit cards rather than charge cards with set credit limits.
I once charged my American Express Green Card approximately $1,200 over my monthly normal personal purchases while on a business trip using it for reimbursable expenses. American Express called and sent me a letter at the end of the month stating: It looks you are charging more than we anticipated, so new charges won’t be approved until we receive payment. I had reached the card’s spending limit.
What sucked about this, of course, is that the card shut down automatically without me knowing it. So when I went to check into the hotel, the card was declined. That’s embarrassing. Of course, using a credit card could lead to the same outcome, but at least you’ll be aware of your limit and, provided you pay attention, when you’re getting close.
Ever wondered if American Express truly offers unlimited credit a mythical beast in the realm of finance? Well, buckle up because we’re diving deep into the world of Amex spending and uncovering the truth behind this elusive concept.
Unveiling the Mystery: No Preset Limits, Not Unlimited
Credit card aficionados, take heart! Although American Express advertises cards with “no preset spending limit,” it’s important to realize that this doesn’t mean you can spend whatever you want. These cards function differently from standard credit cards with set limits, such as the Green, Gold, and Platinum cards.
So How Does It Work?
Imagine a flexible spending system that adapts to your financial behavior like a chameleon Your spending power on these cards fluctuates based on factors like your credit history, payment habits, and purchase patterns. It’s a dynamic dance between your financial responsibility and Amex’s assessment of your trustworthiness.
Building Your Spending Power: A Guide
Think of it like building muscle – the more you use your card responsibly and pay your bills on time, the more your spending capacity grows. Here’s how you can flex your financial muscles and increase your spending power:
- Regular Usage: Treat your Amex card like your go-to companion for everyday purchases. The more you swipe, the more Amex gets a sense of your spending habits and financial stability.
- On-Time Payments: Consistency is key! Make sure you pay your bills in full and on time every month. This demonstrates your commitment to responsible credit management.
- Gradual Increases: Don’t go from zero to hero overnight. Gradually increase your monthly payments over time to show Amex your growing financial strength.
- Maintain a Stellar Credit Profile: Keep your credit score sparkling by paying all your bills on time, not just your Amex ones. Enroll in AutoPay to avoid any accidental slip-ups.
Important Note: In rare cases, Amex might assign a specific spending limit to your account. This could be due to factors like a lower credit score, past payment issues, or high balances on other credit accounts. If this happens, don’t fret! Amex will notify you and explain the reasons behind it.
The Bottom Line: Responsible Spending, Not Limitless Extravagance
Even though American Express cards without a set spending limit provide a special kind of flexibility, it’s important to keep in mind that responsible spending is crucial. Respect your card, make prudent use of it, and gradually increase your spending power. Recall that managing your money wisely is more important than knowing how much you can afford to spend.
Frequently Asked Questions:
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Q: Can I really spend an unlimited amount with an Amex card?
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A: No, there’s no such thing as a truly unlimited credit card. Even with no preset limit, your spending power is based on your financial behavior and Amex’s assessment.
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Q: How do I check my spending power?
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A: Use the handy “Check Spending Power” tool in your Amex online account or mobile app. It’ll give you a clear picture of your current spending capacity.
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Q: What happens if I exceed my spending power?
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A: Amex might decline your transaction or contact you to discuss your spending patterns. It’s best to stay within your limits to avoid any hiccups.
Additional Resources:
- American Express No Preset Spending Limit: https://www.americanexpress.com/en-us/banking/lending/lending-options/no-preset-spending-limit.html
- WalletHub: Does American Express Have an Unlimited Credit Card?: https://wallethub.com/answers/cc/american-express-unlimited-credit-card-2140855393/
Remember, responsible spending is the key to unlocking the full potential of your American Express card. Use it wisely, build your spending power, and enjoy the flexibility it offers!
Why Amex Charge Cards can still be a good thing
Yes, they charge an annual fee when many credit cards don’t. Yes, they aren’t accepted everywhere. Yes, you don’t know exactly how much you can charge on them.
BUT: They are charge cards, not credit cards. The amount is due each month unless you specifically request to pay for a specific purchase over time. If your balance is too high or unpaid, you won’t be charged more.
For those who require the convenience of a credit card but have previously struggled with credit card debt, American Express charge cards are an excellent resource. Contrary to popular belief, you can apply for the basic American Express Green Card without having perfect credit—but you still need good credit.
How American Express calculates your charge card limit
American Express determines spending limits based upon your reported annual income and your payment history with their cards.
More specifically, a reader speculated:
Typically, your AmEx spending limit is three times your highest paid-in-full balance over the last six months. Additionally, they are generally good about giving you some leeway if you call them in advance to let them know about impending charges (I’ve done this with business expenses totaling $8,000 without any problems).
It’s understandable that the charges seemed excessive because I haven’t had an American Express card for very long and this is the first time I’ve used it for business expenses.
When you first start using a card with no pre-set spending limit, be prepared for a low credit limit in order to avoid this situation. Take a little amount from it the first month, pay on schedule, and then take a little bit more each month after that.
You can give them a call in advance to find out if they will approve a big purchase you want to make with one of these cards, say to accumulate reward points. Additionally, by making payments more frequently than once a month, you can always increase the charging capacity of your card.
Many people mistakenly believe they can use American Express and other credit cards with “no pre-set spending limit” to, say, purchase an automobile. Unless you are paid six figures and have a track record of charging tens of thousands of dollars a month and paying the balance off each month, it is unlikely that American Express will approve your new car purchase unless you can show them that the money is available in another account.
A standard credit card, such as any of the ones on our list of the best credit cards, is more likely to grant you a high credit limit if your credit is good.