Is an AmEx Actually Worth It??
<div class="user-question">Is an AmEx actually worth it? How do I know which credit card should I pick and is it even worth getting a credit card that has an annual fee?</div>
Ah, great! You are researching credit cards and shopping around for which ones work best for you. That probably means you’re deciding how you want to expand your wallet (and how adding credit cards affects your credit score).
💳 My Credit Card Step-by-Step Guide
Here is my step-by-step guide on how I analyze credit cards:
1️⃣ Figure out what parts of your monthly spend you’ll be putting on your new credit card.
Group the amounts into things like gas, groceries, travel so you have several categories and can see how much you’re spending in each. A budgeting app often does this for you, so if you have one, now is a great time to take a look at your historical trends.
<div class="frich-tip">Frich tip: the Frich app does this for you! Download the app today.</div>
<div class="frich-tip">Here's what I do: As someone who loves to cook and who travels frequently, the vast majority of my spend is spent first on groceries and then on travel, so cards that offer higher cashback rewards on those categories are what I prioritize.</div>
2️⃣ Next, look at the card offerings.
AmEx has a wide array of cards, so you should compare all of them to see which one fits how you spend your money.
<div class="frich-tip">Here's what I did: When I first got an Amex, I decided the platinum was the right fit for me because I was traveling 5-6 days a week and the points benefits would be the highest using that particular card (at the time, anyways).</div>
There is a caveat here! Not all cards are created equal. Some cards will let you carry a balance and have a maximum spend on them, which are the more colloquially recognized credit cards.
With an AmEx, you are (generally) required to pay your entire balance on a monthly basis, and your “available balance for spend” is essentially calculated as you charge things to the card, but is typically not known by you as the consumer.
This is why you’ll hear people reference an AmEx as a charge card. As such, you should be aware that your spend in any given month cannot exceed what you’re able to repay. This is a Generally Good Rule of Thumb (or as I call it, GGRT), for anyone looking at credit cards or charge cards broadly. It’s also why, if you haven’t already gotten a charge or credit card, now is a great time to look at budgeting apps that can help you manage exactly how much you’re spending and assist you in controlling your budget.
3️⃣ Lastly, look at the card fees vs. the benefits of the cards.
💳 Card fees: When I look at card fees, I will scan the benefits (with an Amex, that often includes things like “Reimbursed fees up to $100 on your favorite airline” and “Uber spend of $25 per month.” I add up the benefits I am certain I’d use, and compare it to the annual fee. If it nets out to what the annual fee is (often for me it is over the amount), then I don’t really worry about the annual fee.
💳 Points: With regard to points, I would review how the points are currently calculated for both cashback and for any other primary uses you would pull the points for- whether it’s flights, hotels, or repaying yourself for purchases. Know what each point is worth and how much (on average) you’ll make per month. Here's how to calculate the value of your points:
<div class="frich-tip">Often, you can do a quick search online to find out broadly what each point on any given credit card is worth. When I ask my friendly LLM what the Amex Platinum currently values 1 point, it tells me that the value ranges from 1 cent to 2.2 cents, depending on how I use the points. If I put the points on a travel partner, for example, it’s closer to 2.2 cents, versus if I use it for cashback in which case it is currently valued at 1 cent. Keep these in mind, when you think about how you'd want to use your points.</div>
💳 Don't Limit Your Options
Once you’ve taken a look at all of your options and determined which (if any) card is right for you, then you can submit an application.
I don’t recommend applying for multiple cards at once as each application will show up on your credit report (we can go into why in more detail later).
In the scenario that you decide you don’t want an Amex, there are a ton of other options in the credit card and charge market available to you, and depending on how you spend, that might be beneficial. Research here is always key!
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Btw - here's how others are doing👀
Have you ever maxed out your credit card?
😬44% Yes...
👏56% No!
At the end of the day, if you decide to apply for any card, don’t forget to track your spending. Keeping yourself financially in line >>>>>> having a fancy credit card.
Saira Rahman
VP, New Investor Initiatives - Fundrise
