The Plum Card from American Express is a straightforward cashback card for business owners. Or is it? The reality is a little different. The most important thing you need to remember about the Plum Card is who the target is. The Plum Card is designed for the business owner who does not want/does not need travel rewards and has variable cash flow which means they will occasionally need to carry a balance.
In the first year, the Plum Card has no annual fee. However, after the first year, the annual fee is $250. This fee may be offset if cardmembers can take full advantage of the 1.5% cashback bonus they receive by paying their balance in full within 10 days of their statement date.
How Does The Plum Card Work?
Like every American Express card, cardholders have a minimum payment due each month. This is a variable payment that is equal to 10% of their new charges (i.e. charges accrued in that statement period) plus any previously deferred balance (more on that below). That amount must be paid by the due date to avoid a late fee. Any other charges can be either paid or deferred.
Here’s where the “bonus” happens. If a cardmember pays their balance within 10 days of their statement closing date, they automatically receive a 1.5% cashback discount on the amount paid. This is issued as a statement credit for the next month.
For example, if a user has a bill of $12,000 and pays the full amount within 10 days of their statement closing date, they will receive a $180 credit on their statement the next month. If a cardmember pays after the 10 days but prior to their due date they do not qualify for the discount.
The key date is the statement closing date, not the due date. So if your statement date is on the 14th of the month, you have until the 24th to make the payment and earn the 1.5% cashback rebate.
So far this doesn’t necessarily sound appealing. However, this benefit makes more sense when you remember that the audience is business owners who have a variable cash flow. These cardholders can carry forward any balance not paid by the due date to the next statement without interest. This means users can finance a purchase interest-free for 60 days if they need to. That is different than the 25-day grace period that is standard for most business credit cards.
What Other Member Benefits Are Included?
The Plum Card is truly a no-frills card. But it does carry some additional benefits that are common with most American Express cards. For instance, cardholders pay no foreign transaction fees. They can also receive some return protection as well as secondary rental car loss and damage insurance.
Plus, additional cards for employees are offered at no additional charge. And American Express will offer cardholders a suite of expense management tools that can help provide guidance on your spending.
What is the Annual Percentage Rate (APR)?
Like most American Express cards, the Plum Card a “charge card” instead of a credit card. The expectation is that cardmembers will pay their balance in full each month. With that in mind, the card does not have a preset spending limit. Cardholders have a general limit that will fluctuate based on purchase and credit history.
Do You Qualify?
The Plum Card is for individuals with good to excellent credit defined as having a credit score between 690 and 850. This is typical of most cards at this level. Most applicants will likely already have a credit score that will qualify them for this card.
Does the Card Have Limitations?
As you can see, the Plum Card is designed for a specific audience. And that audience needs to be wary of the steep penalties that they may incur if they do not pay their balance within the two statement cycles. If that happens, cardholders are charged a late fee of 1.5% of the past-due amount or a minimum of $39 (whichever number is greater).
For example, if a user has a $25,000 balance that is over 30 days past due, they will be hit with a $375 penalty. That can be a real problem for businesses trying to manage cash flow. In situations like these, a credit card may be the better route.
Also, the 1.5% cashback benefit is only available when cardholders pay their bill within 10 days of the statement date. There are other cards that offer this benefit as long as the bill is paid in full before the due date.
American Express may not be accepted at as many retailers as a Mastercard or Visa. This could be a limitation for card members in some areas.
What Cards Are Similar to The Plum Card?
Business owners who are considering the Plum Card may want to consider two other cards. The first is the Capital One Spark Cash Select Card for Business. This card offers the same 1.5% cash back benefit to cardholders. However, the Spark card pays the benefit regardless of when consumers pay their bill in full (as long as it is prior to the due date). This card does not charge an annual fee and there is the opportunity to receive a sign-up bonus.
Another alternative for consumers who are looking to earn more structured rewards, but not travel rewards may want to consider the Ink Business Cash Credit Card from Chase. This card offers a tiered reward system with 5%/2%/1% cashback levels depending on what is purchased. Users also get a sign-up bonus and pay no annual fee.
The Plum Card is designed for small business owners who have variable cash flow that may require them to carry over a balance for one month. The card has a simple, easy-to-understand cashback structure that many business owners like because it goes right to their bottom line.
However, to take full advantage of this card, users have to pay $1,389 per month within 10 days of their statement date to earn enough cashback to make up for the $250 annual fee. That equates to $16,667 per year.