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Bank Re-introduces the “Other” Plastic

By Faye Mergel
Published: Tuesday, January 19th, 2010

Trimming down debts is one of the most popular New Year’s resolutions in 2010, a sign that credit cards will be less popular this year. Many do not want to see more late payments and delinquencies on their credit report, which is why they are holding fast to their resolution. While some consumers are seeing their options on debit cards, others are eyeing charge cards as the plastic they want to start their new financial decade with.

Bank Re-introduces the “Other” PlasticCharge cards do not have interest rates or spending limits but they require holders to pay off their balances in full every month. American Express is the largest issuer of this plastic.

Analysts say many consumers will look at the new card favorably since credit card issuers have recently been imposing harsher terms on their cardholders. They believe that banks are charging higher interest rates and new fees because they (banks) predict that they will lose billions of dollars once the CARD Act is fully implemented next month.

Industry specialists further believe that American Express is trying to capitalize on the public’s resolve to control debts this year. People who have many black marks on their credit report find it difficult to apply for mortgage, get a car loan, and, in some cases, qualify for a job.

But experts say charge cards like those issued by American Express is not for everyone, since it also has its costs and limitations. The giant card issuer has not publicly disclosed yet its approval standards, but insiders say one needs to have a solid credit background in order to qualify. This means that consumers who are still trying to repair their credit may still have to wait a bit more before signing up.

Mailing statistics also showed that AmEx is targeting clients with solid credit. Last year, majority of its mailings (69 percent) were for people who have strong creditworthiness, households with credit ratings of 760 and above.

As for the charge card’s fees, AmEx charges an annual fee ranging from $25 to $450. The fees depend according to the card a client picks, with rewards and additional perks all in upon membership. For instance, a charge cardholder can get premium seat at select concerts if he has a Gold Card. Meanwhile, clients who are in their 20s and 30s can settle for the fewer perks by purchasing the cheaper Zync Card for only $25 a year.

People who plan to sign up are advised to make sure that they can pay off their balances each month, otherwise they will face penalties. Presently, AmEx charges a late fee of $35 or 2.99 percent of the balance, whichever is bigger.

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