The Plum Card® from American Express Review

The Plum Card® from American Express would best fall into the cash-back card category, but it does not work like a standard cash-back card that might offer introductory or tiered bonuses based on spending. The card could be a good choice for businesses that have unpredictable revenue streams, yet it won’t suit the needs of companies looking for travel rewards or cash-back options. If you’re looking for a true rewards card, your business will be better off looking elsewhere for cards that accumulate miles or points used to offset the cost of future purchases. The main advantage of owning The Plum Card® is having the flexibility to use additional time in paying off balances. Seasonal businesses might benefit from having an additional month to pay, but one must weigh the advantages and disadvantages.

The Essentials of The Plum Card from American Express

  • APR: N/A
  • Annual Fee: $250 (waived in the first year)
  • Primary feature: Businesses that pay off balances early receive a 1.5 percent statement credit in the following month
  • Introductory bonus offer: None

What’s Interesting about the Plum Card from American Express

Not your traditional credit card, The Plum Card® is a charge card and requires you to pay off your balance in full each month. If you charge $4,000 in October, you will be expected to pay $4,000 in November or face a significant penalty. This is where The Plum card differs from other charge card arrangements. Rather than the standard 30-day window, you can take an additional 30 days to address that balance, provided you pay a part of the existing amount owed.

With The Plum Card®, you won’t have a predetermined maximum limit like you would with other business cards. As such, you can make large purchases for office equipment without having to tap other assets. Then, by paying off those purchases earlier than the due date, you can earn a credit that will appear on your next statement. Also, if your business is growing, you won’t need to apply for higher limits as your spending needs expand.

Things to Consider

Compared to other business credit cards, the $250 annual fee is steep. In order to negate the fee, your business would have to spend more than $16,000 on the card annually for the payment discount to overcome that yearly expense. You can find other cards that charge no fee and whose cash-back incentives can be used to purchase gift cards or be applied to some other product or service. Failing to pay off existing balances will induce penalties of 1.5 percent of the past due amount or $39, whichever is greater. So, budgeting for large capital expenditures with erratic cash flow could be tricky as well as costly.

How to Get the Most from This Card

In order to optimize the use of The Plum Card®, it’s crucial to know exactly how the card works. Other charge cards work pretty simply: incur a balance and pay it off the next month to avoid any penalties. With The Plum Card® from American Express, you can take more time to manage balances by stretching payments out over a 60-day period. However, to avoid interest on the existing balance, you must pay at least 10 percent of the prior balance.

Let’s look at an example. If you’re spending $4,000 per month on the card, and in October revenues don’t come in as expected, you can pay 10 percent or $400 of the prior month’s balance and carry October’s $4,000 expenditures to November. In this case, you’d carry forward $7,600 to the following month without incurring interest. To avoid interest or penalties, the entire prior balance of $3,600 must then be paid off, and the cycle would repeat if you continued to use the 60-day window.

On the other side of the equation, you will receive a 1.5 percent rebate applied to the prior month’s purchase amount if you pay the balance off early. The discount will appear as a credit on your next statement as long as you pay your balance within 10 days of your statement closing date, which is a few weeks before your actual due date. Thus, paying off that entire $4,000 early would earn you a $60 credit in the following month.

Other Card Options that Might Interest You

You could find other cards that better fit your business — especially if you plan to pay off your entire balance each month. New businesses making purchases will benefit from 0 percent introductory rates that spread payments out over several months. Bank of America® Business Advantage Cash Rewards Mastercard® credit card offers interest-free financing on purchases for the first nine months of ownership. Couple that benefit with no annual fee and up to 3 percent cash back on select spending categories, and the BoA card compares very favorably to The Plum Card® — if you plan to carry no balance after the introductory period.

Likewise, The Blue Business® Plus Credit Card from American Express also gives small seasonal and start-up businesses a less costly way of managing spending. Also, you can spend beyond your credit limit if needed, but the amount that exceeds the maximum will be due in full in the next billing period. There’s no annual fee for the Blue Business Plus card, and reward points double from one to two with each dollar spent up to the first $50,000 yearly.

The Final Word

The Plum Card® from American Express fits well for businesses whose sales fluctuate significantly from month to month, and an extra 30 days to pay off total balances can help in a pinch. However, the card comes with a $250 annual fee in the second year and you must spend more than $1,300 per month to justify that fee — and that also entails regularly paying earlier than your monthly due date. The 1.5 percent discount offered by The Plum Card® only kicks in when you pay your balance by the statement closing date. To avoid annual fees and take advantage of true cash-back rewards programs, you’d find stronger options among other notable business cards.

Thom Tracy

Personal Finance Contributor

Thom Tracy is a personal finance writer from Scranton, PA with 28 years of experience in the insurance, employee benefits and financial services industries. He has been a contributor to QuickBooks and Investopedia, and likes to cook, hike, and discover new music in his spare time.