The Plum Card® From American Express OPEN
REVIEW

In this review, you will find out:

• Why this is the card you want to consider if you need high limits and want to earn cash back
• How the deferred payment works and why it is a great tool for working capital management
• Whether this card will suit your business?

 

Introduction to the Plum Card from American Express

This business card is the official business credit card for AskMrCreditCard.com and in our opinion, one of the most innovative business card around. I use it primarily for the cash rebates and also because it has no preset spending limits. But there is more to the card than just these features. Let's find out more.
 

Plum Card Details

The reason why this is really an innovative card is because it is both a cash back business credit card, but it also has a line of credit that resembles more of a vendor financing type deal than a typical credit card.

Plum As A Cash Back Card

- To start off, the card pays you 1.5% cash back on everything that you purchase. To earn the 1.5% cash back, you have to pay off your bills in full within 10 days. What this means is that you pay in full as though you have a 10 day grace period, you will get the 1.5% cash back. For those of you who really want to know the details, here is how it works. As a sign up bonus, you will earn 2% cash back during the first six months when you pay off your bills in full.

For a regular credit card, say your cycle date is the 1st of every month. If you have a 20 grace period, your due date is the 20th of the month. If you have a 25 day grace period, the due date is the 25th of every month. To earn your 1.5% for the Plum Card, your due date will be on the 10th in this example.

Using the Plum For "Vendor Financing or Trade Terms"

- Any business who buys from a supplier realizes how important trade terms and vendor financing are. Every business is trying to shoot for at least 90 day trade terms. But these days, with big corporations squeezing their suppliers, favorable terms are harder to come by because every small business is getting squeezed. This is where the Plum Card shines. You can 0% financing for 60 days with just a 10% down payment. How does this work practically?

Well. let's use the previous example. Your cycle date is the 1st of every month. Your normal due date is the 25th of every month. When you bill is due on the 25th, you can choose to pay only 10% and pay off the bill fully on the next due date. Therefore, by paying 10% down, you essentially get 0% financing for the rest of the 90% for 60 days. With a regular credit card, you would pay the minimum payment, and any unpaid portion will start accruing interest.

This feature is invaluable because firstly, you may not even get 60 day trade terms with your vendors. Secondly, should a big order arrive and you need working capital urgently, this card (with no preset spending limit) is a great alternative to approaching your banker when time is a constraint. Below is an example of how this works in practice.

Month 1: You add $10,000 in new charges. You have to pay $1000 (10,000 * 10%) to defer $9,000 into the next month. Month 2: In the second month, you charge another $10,000 on top of the $9,000 deferral for a total balance of $19,000. To qualify for the deferral, you have to pay off the complete amount of the first month's deferral ($9,000) and 10% of the new $10,000 in charges = $1,000.

No Foreign Transaction Fees - While this is a feature that many folks with look for in travel and airline cards, it is very important in a business credit card. The reason is because credit card companies can consider a US Dollar transaction with a foreign business as a foreign transaction and charge you a fee (normally 3%). For example, if you use a Canadian webhost, even though you are paying US dollars, many cards will charge a foreign transaction fee for that.

OPEN Merchants - Like all Amex Business Cards, you can get 5% discount at OPENSAVINGs merchants.
 

Plum Card Peer Comparison

When I review cards, I normally put out a table comparing similar cards. However, this card is so unique that it will be like comparing apples and oranges.

For example, many folks will say that while it is great to be able to earn unlimited 1.5% cash back if you pay early and in full, you have to contend with a $250 annual fee (though it is waived for the first year). Most other business cash back cards have no annual fee. For example, the Capital One Spark Cash has a $59 annual fee and allows you to earn 2% cash back on every purchase. The Capital One Spark Cash Select has no annual fee and allows you to earn 1.5% cash back. So if you simply look at these two cards, then the $250 annual fee on the Plum will put you off.

What is missing in this analysis is that the Plum Card is also a charge card. Hence, there is no pre-set spending limit. You have to work your way up and get Amex comfortable with what you are charging. But at max, a regular business credit card will give you a $30,000 line of credit. What if you need to charge $50,000 or $200,000 a month on your card? This is where this card shines. In fact, if you research enough on other business cards, you will find that there are instances where a Capital One Sparks gives you only $1,000 in credit. What if your business needs a %50,000 line? Well, that Capital One Sparks will be useless even if there is no annual fee.

With regards to the payment option, there is really no comparison as well. That is because no other credit card offer this. In a way, this is a standout feature of this card and allows you to better manage your working capital. It is cheaper than a regular line of credit because with a line of credit from a bank, you will be charged an interest the moment you draw on it. For this card, you pay 10% and get 0% for 60 days.
 

Our Take: Is the Plum Card from American Express Good?

Because this card is so unique (it is a charge card, cash back card and line of credit all in one), this will suit certain businesses better. If you are not going to charge a lot to your card (eg only $1,000 to $2,000 a month) and you simply want to earn cash back, then you should simply get other business credit cards that let you earn cash back because almost all other such cards do not charge an annual fee whereas this card charges a $250 annual fee.

However, if you can pay early, in full, want to cash back, but need a very large credit line, then this card will be very suitable for your business. When I say large large credit lines, I am talking about at least $40,000 and up. Many business credit cards will offer credit lines of up to $25,000 or even $30,000. But if you need a card for much larger lines, then you are really relying on charge cards with no-preset spending limits. And this is one of the rare ones which allow you to earn cash back. I would say that the $250 annual fee is worth it in this context because that is a typical fee of an American Express charge card.

You will also find this card suitable if you could use the deferred payment option, where managing your working capital is very important for your business. This happens when your business is seasonal, or if you want a credit line to take care of an unexpected large order or even when your customers take their own sweet paying paying you as a supplier. You could (and should) get a line of credit from your bank. But having this card is another great resource because the 10% down and 0% interest for 60 days is better than many line of credit terms. (note: even if you get this card, you should always have an extra line of credit from a bank just in case).The $250 annual fee would be a small one to pay for such a large line of credit and limit.

To sum up, you should get this card if
 

 

 

• You can do the early pay, want to earn cash back and need very high limits on your card
• Your business needs the flexibility of the deferred payment option

This card will not be suitable for your business if
 

• You simply want to earn cash back and do not have a need for a high limit and your business is cash flow positive and you do not need the deferred payment option