Low Rate Gold
Sydney Morning Herald
Wednesday June 28, 2006
AMERICAN EXPRESS HAS JUST LOWERED THE INTEREST RATE ON ITS PREMIUM CREDIT CARD BUT STILL OFFERS THE SAME REWARDS PROGRAMS. IS IT WORTH TAKING UP THE OFFER? MICHELLE INNIS WEIGHS THE PROS AND CONS.
What is it If you have a gold American Express credit card in your wallet, it's likely you'll also have a letter from the company proposing to reduce the interest rate on that card - from 17.49 per cent to 11.99 per cent.American Express is trying to capture a share of the burgeoning low-rate credit card market. And although the card comes with some hefty fees, it has a full rewards program."There are 45 credit cards in the marketplace that have interest rates of 13 per cent or under," Cannex spokesman Garfield Wright says. "Thirteen cards have interest rates of 10 per cent or less. There are so many low-rate cards now that to attract attention, you have to offer something more than just a low rate."What it offers He says the 11.99 per cent offered on the card is the lowest for one that is combined with a full rewards program. For every dollar you spend on your American Express gold credit card, you get one point to put towards a reward program. The head of premium lending at American Express, Fady Taouk, says the points won't expire, and there is no cap on how many can be accrued.Cardholders get 55 days interest free, an online fraud-protection guarantee and access to a 65-basis point reduction in interest charged on an AMP home loan for amounts between $100,000 and $499,999.American Express will allow outstanding balances from other cards to be transferred to the gold card. The interest rate charged for balance transfers is 6.99 per cent for six months. It then reverts to 11.99 per cent.Cannex's Wright says any cardholder who carries an outstanding balance for two months or more should review whether a reward program carries any benefits. "Every dollar you pay in interest comes off the value of any reward program," he says.InfoChoice spokesman Denis Orrock says Australians now have the capacity to borrow up to $95 billion in credit card debt. He says Reserve Bank of Australia data show we have $34 billion outstanding on credit cards and about $26 billion of that is accruing interest."The data also show that we might all be getting new low-rate cards, but we are not cancelling the old cards," he says. "And a lot of interest is being charged on balance transfers that have not been paid off."American Express spokeswoman Katie Jones says customers who have an existing gold card debt can pay it off at 11.99 per cent but they can't get access to the balance transfer rate of 6.99 per cent.What it costs Apart from a low interest rate, the card comes with annual fees and charges. There is a $70 annual card fee, plus fees to join the reward schemes. American Express has two reward programs: Choices and Ascent. Earlier this year, it raised the cost of being a member of both reward schemes to $40 and $80 respectively. Therefore, the gold card could cost $150 or $110 a year, before you pay interest on any outstanding balance.Where it fits in St George and BankWest offer the lowest-rate credit cards with 8.99 per cent interest and annual fees of less than $50. But these cards have no or limited reward programs. Suncorp has a credit card at 9.95 per cent, with a $29 annual fee and two reward programs with annual fees of $39 or $69.Wright says the American Express gold card has possibly the most comprehensive reward program for a low-rate card."If you are paying the card off each month, then the interest rate doesn't matter," he says. "If you want the rewards and you think that occasionally you'll need to carry a balance, then this is a good low-rate card."But many people who get a low-rate card get lulled into thinking they can carry their debt for longer because it is a low interest rate. You don't want to pay too much interest by carrying a balance too often."
© 2006 Sydney Morning Herald
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