Posted by sirtheta on June 20, 2017
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Published on June 20th, 2017 | by sirtheta

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American Express Introducing “Plan It” – Pay Over Time for Credit Cards

Several of my American Express statements that have cut recently have included some amendments to the terms and conditions that highlight a new feature that American Express will be introducing for its credit cards, starting on August 30, 2017: “Plan It”. Jokes about the name aside, the feature is similar to “Pay Over Time” for charge cards and Chase’s “Blueprint” feature. All eligible card members will be automatically enrolled. As described by American Express at the FAQ page:

Plan It is a new feature that gives you the flexibility of paying off large purchases over a period of time. With Plan It, you can place a qualifying purchase into a plan, which is then paid off in equal monthly amounts over a period of time that you choose. Instead of paying interest (subject to your current Purchase APR), you will pay a monthly plan fee that will be disclosed upfront.

The “plan fee” is a fixed finance charge that American Express appears to cap at 1.06% of each purchase moved in to “Plan It”; the percentage of this fee will likely be significantly lower if your credit card has an APR in the teens. The primary usefulness of “Plan It” (and the reason it’s compared to Chase’s “Blueprint”) is that you do not incur interest charges on purchases (i.e. you will not forfeit your grace period), so long as you pay your billed balance not with “Plan It” plus the monthly amount of purchases in “Plan It”. (American Express terms this your “adjusted balance”.)

While “Plan It” doesn’t have much relevance to churners and probably encourages the wrong type of behavior, it does look well-designed to benefit consumers if used in an appropriate manner. I could see it being used as a tool to help eliminate higher-interest rate debt or to avoid high-interest rate debt due to emergency expenses for which one is unprepared. In the latter case, as long as you can pay your “adjusted balance” every month, you won’t be immediately incurring interest on your regular purchases. For consumers without many credit cards, that’s likely to be a very solid deal even if the “plan fee” works out to about equal or more than the card’s APR.

What are your thoughts?



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Jeremy
Jeremy

1.06% is less than a number of savings accounts. Are you sure there isn’t anything to be made here?

Dan
Dan

That’s in addition to standard APR it seems

ice_corner
ice_corner

I do not believe APR applies in this case. The idea is you pay a fee and then get an instant finance option for a large purchase. The fee basically covers the interest charge. This option is actually quite common in some other countries.

Jeremy’s question is quite interesting. Although 1.06% in fee does seemingly sound less than a lot of savings account, the cost of the fee does not equal to 1.06% APR. Assuming the period of time is 12 months, your average balance over the course of a year will be half of your original balance. Therefore 1.06% fee based on the original balance will approximately equal to 2.12% APR. This is not necessarily bad, but if you’re comparing it to some okay savings account (1% – 1.5% interest), this option is clearly not a money maker.

ice_corner
ice_corner

Looks like the fee actually applies each month. According to FAQ:

“The plan fee is the fee you will pay each month that you have an outstanding balance in a plan. For planned purchases, you will be charged the plan fee each month instead of the Purchase APR.”

If the fee is ~1% each month, then the cost is really no different than some standard APR. But this may be useful for people coming up a plan to pay of their credit card debt.

Lrdx
Lrdx

That would make absolutely zero sense; one would be better off for just paying less than the balance.

Aaron
Aaron

In the article:

Note that use of “Plan It” will not incur interest charges on purchases (i.e. you will not forfeit your grace period), so long as you pay your billed balance not with “Plan It” plus the monthly amount of purchases in “Plan It”.

bob
bob

i guess it’s also a “in-house balance transfer fee.” Lower than the 3% you might get charged elsewhere, but gets you off the hook for your Charge Card balance

throwaway name
throwaway name

It’s per month, not apr.

Devin G
Devin G

Kind of reminds me of Blispay, but with a fee associated with using the service instead of a no-fee 0% APR 6 month term. The fee does seem small though at up to 1.06% of purchase price.

If you had prime rate with Amex Everyday @ 13.99% APR, then it would be 1.167% in interest accrued monthly at the start. If you had the worst rate with Amex Everyday @ 23.99% APR, then it would be 2.0% interest charged monthly at the start.

However, it seems to me that the fee will stay the same for the life of the Plan It term. Since the fee is based on the purchase price, while at the beginning you may be paying less interest relative to if you were to let it sit and accrue interest, it looks like the relative ‘interest’ that you are charged will increase relative to the balance you carry towards the end of your Plan It period.

I think this would be good for people who may have an unexpected large expense before they get their tax break to pay it off, or something like that. Not sure if it would be good for someone who carries balances.

Max
Max

I called Amex last week to tell them to stop sending me so much junk mail and the lady on the phone told me she had a special offer to tell me about while I was on the phone. I assumed it was BS but given she was nice I listened through her pitch.

Anyways, it was opting into a pay over time plan (I believe this program?) for my Plat and in return I’d get 10k MR points. She said that the program/points were invite only at this time and specifically mentioned my 4+ years of high spending and paying my card off in full each money as a reason I was selected, which seems weird in my mind. If you’re going to do an interest based payment plan why would you roll it out to people who have never carried a balance before? Whatever though, I singed up and got my 10k MR with no plans to ever use the program 😀

Also FWIW the APR they gave me was something like 18.79%

William Charles

That’s a fairly common offer, I hope we see something similar for this plan it program.

Mike P.
Mike P.

I like it as a consumer, and I think it makes a lot of sense for Amex to do this.

I tend to divide my cards into one of two categories: 1. cards we use regularly and pay the full statement balance on each month, and 2. cards we keep zeroed out in case we need to make a larger purchase and want some flexibility to pay it off over two or three months. (I know, I know, we should save up before making such a purchase. We’re working on it!)

I would never use our Blue Cash Preferred to make a larger purchase because it would take us out of grace if we couldn’t pay the statement balance. With this new feature I’d definitely consider it… assuming I’m not working on an MSR or passing up an opportunity for a better point/cash back value.

Lrdx
Lrdx

This seems like a valid option for someone who normally pays off the full balance, but has some larger unexpected expense once in a while. Normally, if you didn’t pay full balance, you would get charged interest on new purchases as well. Moving that expense to this plan allows you to still pay “full” balance, and you could continue to use the card interest-free within the grace period. This can be a huge difference.

jf
jf

This is great. Something different. But still. I’d rather go back to the days when a person could have Amex OBC or BCP and get APR reductions down to 5 or 6%. That is more flexibility. Anywho, this sounds a lot like chase blueprint.

So what I want to know is this. Amex was known for being a charge card. Even some residual effects of this is present when folks say you MUST pay in full on their revolvers.

The funny thing is, for almost a year, amex has exponentially reduced permanent APR reductions (ahem capital one) and instead is doing promotional ones, like 0% for 6 or 12 months…..AND also on their charge cards for eligible pay over time charges >$100….

I also think if its indeed only 1.xx% fee charged monthly, thats great, just wish there was more info as in, what charges qualify, and how much do they have to be? What if you are in POT? Does that end?

William Charles

Yay a sirtheta post!

Don Hagstrom
Don Hagstrom

1.06% appears to be the maximum monthly fee / rate. An additional data point: charge cards are not eligible for this program (e.g. platinum, gold, green); only the revolving credit cards. I have 3 eligible AMEX revolvers each with a different Plan It maximum rate: 0.59%, 0.60%, and 0.70%. Note that I could be offered a rate for each different purchase that is different but in no event more than the maximum rate that they offered me in these terms.

They do say that the Plan It rate is dependent on a “variety of factors”, including the regular base rate on my cards. Two of my cards have current APRs (adjusted for the latest prime rate increase) of 13.99% and 14.24%; the third has the more standard AMEX rate of 16.24%.

Angela Weathers
Angela Weathers

I think I got suckered in because of ignorance. I signed up for this Plan It thinking that I could pay off 4500.00 travel charge in 4 months I sent in 2625.00 thinking it would bring down that 4500 balance significantly andthat I could be off the hook faster than 9 months. I sent in 925.00 for Feb and March thinking the same. Now my planit is at 3775 with 7 more months to go. This was not my intention and I don’t know what to do about it. I called n and talked with a supervisor and now I’m waiting on a callfrom his supervisor. Please advise

HarryTheFirstHarry
HarryTheFirstHarry

What was the resolution for your issue? It appears that just sending in a payment will not make it apply towards PlanIt purchases because those would be at the lower APR than all other purchases and most cards apply payments to higher APR balances first before applying to lower APR though I am not sure if this is what happened in your case.

HarryTheFirstHarry
HarryTheFirstHarry

I saw an offer of no Plan It fee until May something 2019 on my BCP….not sure if that is targeted or generally available. I have not used this before, but it appears this would be a 0 % APR with 0 fee which is as good as it gets.

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