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The Plum Card® from American Express OPEN costs an annual fee of $250 dollars, waived for the first year, that offers small business owners a discount on their monthly bills.
The Plum Card® from American Express OPEN Pros
- 1.5% discount whenever you pay your statement credit early
- You can defer paying some of your monthly bill with no interest charged
- No annual fee for additional cards
The Plum Card® from American Express OPEN Cons
- $250 annual fee is quite expensive even if it is waived for the first year
Let's look at the main benefits of The Plum Card® from American Express OPEN.
How does The Plum Card® from American Express OPEN work?
With the card you receive a 1.5% discount on your monthly bill whenever you take advantage of the Early Pay Discount. To qualify for Early pay, you have to pay off the balance of the card within 10 days of the billing cycle closing. The 1.5% discount will automatically apply as a statement credit towards your bill for the next month. By taking advantage of this feature you effectively receive 1.5% cash back. While the discount is not technically a spending reward, we think its appropriate to consider at such when comparing it to other cards.
The second main feature of the card is the ability to pay some charges over a longer period of time. Normally as a charge card your business would be required to pay off your entire balance at the end of each billing cylce. With The Plum Card® from American Express OPEN if you pay at least 10% of the new charges on the card in the current month, and pay off any deferral from the previous month you can wait to pay off the remainder for another billing cycle with no interest. This feature makes The Plum Card® from American Express OPEN useful if your business experience month to month cash flow fluctuations that might make paying all your expenses difficult.
Lets look at how this works with a 3 month example. In this example we assume you spend 3,000 per month on The Plum Card® from American Express OPEN.
Month 1: The 3,000 in new charges get added to your statement credit. By paying $300 (3,000 * 10%), you can defer $2,700 into the next month.
Month 2: In the second month 3,000 in new charges is added on top of the 2,700 deferral for a total balance of 5,700. To be eligible for the deferral you have to pay off the complete amount of the defrral $2,700 and the 10% of the new 3,000 in charges = $300. The total payment for the month is $3,000 with $2,700 deferred into the next month.
Month 3: Month 3 looks similar to the second month. With the same $2,700 deferral and $3,000 in charges being added.
The deferral benefit effectively acts as a 30 day no interest loan on a portion of your balance. With most business credit cards having interest rates higher than 12% annually, this feature can save approximately 1% or more that you would pay towards interest charges on your balance.
|Credit Needed||Excellent Credit|
The 1.5% discount alone, does not make The Plum Card® from American Express OPEN a good choice for small business owners. The discount is effectively a cash back / statement credit award at a rewards rate of 1.5%. With the high annual fee of $250 a year, you'd have to spend over $16,000 annually on the card just to break even. Judged purely on rewards, a number of other small business cards offer greater rewards rates, with substantially less annual costs. A card like the Capital One® Spark® Cash offers 2% cash back on all purchases and will cost you only $95 a year.
The following graph shows the total savings cash back vs discount for the two cards assuming you spend 20,000 a year on the cards, over 3 years.
The rewards for The Plum Card® from American Express OPEN don't stack up favorably on their own when you compare it to these other options. The annual fee simply eats too much of your savings to make it worthwhile. If you're looking for a 1.5% rewards rate, the Capital One® Spark Cash® Select is a business card with 1.5% cash back and no annual fee whatsoever. Clearly the superior choice in every way when it comes to savings.
Where the card can come out ahead however is for businesses where short term cash flow issues force them to carry short term balances. By taking advantage of the deferral you can shift keep a balance on the credit card constantly without paying interest until your company is better able to pay it off. This works if the company has a spike in expenses or loss in revenues for a period of a month.
The math suggests that The Plum Card® from American Express OPEN is most suited to businesses that can take advantage of it Pay It Later feature. Even then we would only consider the card if you're expecting to spend at least 16,000 dollars annually.
If your business does not have an existing credit history, applying for The Plum Card® from American Express OPEN may require you to use a personal guarantee. American Express may use your personal credit history in determining whether or not to issue the card to your small business. For businesses with an established credit history this might not be an issue.
What credit score do I need for The Plum Card® from American Express OPEN?
The Plum Card® from American Express OPEN is marketed towards businesses with an excellent credit profile. If you're a new business and need to use a personal guarantee the score would be greater than 720.
The Plum Card® from American Express OPEN History
A history of the changes made to card the card's features, benefits, bonuses and any other other details that have an impact in a cardholder's decision.
July 29, 2014 to October 17, 2014
Limited Offer for new cardholders: Receive $200 in statement credits for every $10,000 you spend in the first 3 months of Membership for up to $30,000 in total spending. This equates to an additional 2% in savings on the card in the first quarter or .5% on an annualized basis in the first year.