January 18, 2010
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Charge or Credit; The Best Solution, Pt.4
What you don't know will hurt you.Although American Express doesn't tell you, your credit or charge card has a credit limit. The company internally caps your credit limit and then monitors your credit report regularly. Unlike traditional credit cards where lenders set a particular credit limit and maintains that figure, AmEx continually adjust your credit cap according to activity on your credit report. If AmEx customers are concerned about being denied credit because they've already maxed their limit, they can contact customer service in advance to find out. Since over-the-limit charges are not accepted with an AmEx charge card, they do not generate over-the-limit penalties that traditional credit cards incur.
Like most credit card accounts, the AmEx charge card gives customers the option of setting up email and text message alerts when their balance is nearing the limit. The company also offers the option of setting spending limits for additional cardholders on your account such as children and employees.
Credit cards and charge cards equally impact your credit score; however, charge cards differ in how they affect your score. Credit bureaus use the credit utilization score when considering both cards which takes into consideration the amount of unused credit. Since traditional charge cards to have a published credit limit, older scoring models might use the highest amount once charged as the limit. Bureaus that use these older models of scoring the utilization score can cause your score to decrease. Credit cards are issued with a credit limit. Therefore, the set limit is always used in calculating your utilization score which makes up over 30 percent of your credit score.
Around the clock customer service is another big perk for AmEx charge card customers. Other perks not offered by most major credit card companies is a free annual credit report with credit score and a $50 roadside coverage when traveling more than 50 miles from home. The most recent benefit for AmEx cardholders is the ability to apply reward dollars toward state and federal income taxes. The bottom line is that you need to determine how and if a charge card will be the best choice for your spending habits and budget.