American Express has come up with a unique way to save with a credit card. It's called the Amex One Card, and it has a "high-yield savings account" attached to it. (At 4.25% APY, at the time of writing.) Whether it's worthwhile for you and/or your family depends on your spending habits and current credit card rates.
The way it works is that once you apply for and receive the Amex One Card credit card, American Express sets up an online savings account for you at American Express Bank. You use the card in normal transactions to pay for purchases. For qualifying purchases, they place 1% of your expenditures into the savings account. (Qualifying purchases exclude Travelers and Gift Cheques, finance charges, fees, returned goods or services, etc.) So you are basically saving 1% off their interest rate, which gets compounded.
While I suppose they could lower their card rate by, say, 1.25% instead, for those prone to using their credit card for everything and are poor at saving, this sounds like an ideal way to save some money automatically. Which is what they're actually saying in their promo material. I know that I could have used something like this when I was young and crazy and buying everything with credit cards.
The account has no minimum balance requirements and Amex does not charge any withdrawal penalites or monthly maintenance fees. If you catch the savings bug, you can also set up additional automatic transfers from a linked checking account.
The savings account is FDIC-insured, to the typical amounts. While there are no fees for the account, the Amex One Card carries a fee of $35/yr, with the first year waived. The credit card itself is setup so that you don't pay interest on new purchases even if you're carrying a balance from the previous month. The card also has other features, including the ability to transfer balances from other cards, fee-free, online. You can share extra cards with "those close to you" at no extra cost.
Amex is offering a bonus $25 for your savings account, after your first purchase. The interest rate (at the time of writing) is at the low of the spectrum - which is typical for online savings accounts that do not charge fees.
The APR (Annual Percentage Rate) for the card ranges from 14.24, 15.24, and 16.24%, depending on your credit history, with a default of 21.24%. Considering that I received an application in the mail recently for a different American Express credit card at 26+%, 21.24% seems like a bargain.
Learn more at their website: Amex One Card
Your card and savings account can be managed online 24/7, like any online savings account should. Before you decide to get this card, determine if you can get a significantly lower rate elsewhere. Just because they're offering an attached 4% savings account and automatic 1% deposit from expenditures does not mean you'll actually benefit financially.
If you already have a low card that is maxed out, you may end up with a fairly high rate on the Amex One Card. A 1% savings may not be worth it to you. I suggest you pull out a spreadsheet and average out your expenses, see whether it's worth it for your spending habits and current credit card rates.
Interestingly, they make no obvious mention of whether you can use the savings account towards your monthly credit card balance, or whether they would do this as a recourse to an overdue account. Might be in the small print, and worth verifying, possibly with a customer service rep. (There is a late fee charge of $29 for the card.)
Compare the Amex terms and conditions with online savings accounts for Ing Direct, Emigrant Direct, or HSBC Direct. At the time of this writing:
- Emigrant Direct has no minimum balance requirement and no setup or monthly fees. You can link up to two accounts to their online savings account.
- Ing Direct similarly has no fees and allows up to three other accounts to be linked to their online savings account.
- HSBC Direct has no fees, service charges, or minimum balance requirements. You can only link one bank account to the online savings account, with transfer preference given to an existing HSBC checking account. That is, transfers between their online savings account and accounts at other banks may take longer.
These three are amongst the most flexibile online savings account offerings, and have the least string. Note that their terms and interest rates may change by the time you read this.
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