May 27, 2024

Bucks: Big Changes to American Express’s Blue Cash Card

American Express is altering the rewards formula on its popular Blue Cash card, but current users will be grandfathered in under the old program for now.

Starting today, there are two cards, the Everyday card, which will have no annual fee, and the Preferred card, which will cost $75 a year. The old card had no annual fee.

Holders of the Everyday card will earn 3 percent cash back at grocery stores, 2 percent back at gas stations and department stores and 1 percent back on all other purchases. The old card gave back 5 percent on all gas, grocery and drug stores once you passed $6,500 in total annual spending, which made the card popular among big spenders.

The Preferred card adds that $75 annual fee and will give away an industry-leading 6 percent on groceries though just 3 percent on gas and department stores. And the all-other-spending category yields 1 percent from the first dollar you spend, not the 1.25 percent that existing customers earn when they spend beyond $6,500.

So what’s going on here and why?

Well, few companies make a move in the card industry these days without a spreadsheet-wielding army behind them with models showing that the card issuer will come out ahead when all is said and done. E-Bai Koo, an American Express vice president, wouldn’t comment on its model.

That said, the company deserves some credit for not forcing the new scheme on current customers.

Giving 5 percent back on fuel purchases left the company vulnerable to volatile gas prices. Plus, it exposed the company to people trying to game the system by using the card as a business card to pay for fuel for a fleet of vehicles.

Grocery spending is a little less subject to those sorts of shenanigans, since there is only so much one can eat or stockpile. And Mr. Koo noted that government data shows that people traditionally spend more on groceries than gas.

When I heard that changes were afoot, I worried that American Express was moving to the same noxious system as the ones that Discover, Chase and Bank of America use on some cards, where there’s a different cash-back bonus every few months. Once you figure out what it is, there are sometimes caps on how much you can get back and you may have to register to earn the rebate.

Mr. Koo said the company learned in its research that people aren’t big fans of that approach, so the company decided to avoid it. And there are no limits on how much cash you can earn each year through the Blue cards. You get the cash back by requesting a credit on your statement; you can do this as long as there is at least $25 available. Merchandise and gift cards are an option, too, in lieu of the rebate.

Personally, I find this one tempting. The majority of my household’s groceries come from Fresh Direct, an online grocery service. Our $5,000 or so annual bill would yield $225 each year after the annual fee, which is still more than a 4 percent rebate.

Anyone else tempted?

Article source:

Speak Your Mind