What is Pay Over Time?

Pay Over Time was always a feature for American Express charge cards. Cardholders can choose to pay their statements in full or carry a balance on eligible charges, up to their Pay Over Time Limit.

However, it was recently brought to my attention that some of my cards were auto-enrolled in Pay Over Time, which makes them act like credit cards.

Cards auto-enrolled in Pay Over Time:

• American Express® Gold Card
• American Express® Green Card
• The Platinum Card® from American Express
• American Express® Business Gold Card

You can check your Pay Over Time status by logging into your Amex account -> Account Services -> Pay Charges Over Time. All of my cards had a default Pay Over Time limit of $10,000.

An important note is that although there is a Pay Over Time Limit, it’s not the same as a credit limit. While the cards technically don’t have a credit limit, if your Pay Over Time Limit is $10,000, you can carry a balance of up to $10,000 and pay the remainder in full.  

Important note: Although Pay Over Time is an option, I recommend avoiding it since paying interest usually negates any points value. Always pay off the credit card balance in full, and don’t get a credit card if it tempts you to spend more than you normally would.

Pay Over Time 10,000 MR Bonus

The negative impact of being auto-enrolled in Pay Over Time is that cardholders are no longer eligible for the 10,000 MR bonus. In the past, Amex sent out targeted offers to enroll in the optional feature. My guess is that the bonus no longer exists.

I had my fair share of enrollment bonuses since I have multiple Amex Platinum and Gold cards.

Why Would Amex Shift to Credit Cards from Charge Cards?

The elephant in the room is why American Express would change their charge cards to credit cards. To answer this question, let’s dive into their Q4 2019 financial statements.

Since Amex is a publicly traded company, its earnings report is publicly available: https://ir.americanexpress.com/Cache/IRCache/1ef02650-2d57-1ac2-cedb-51e6bc3ad90a.PDF?O=PDF&T=&Y=&D=&FID=1ef02650-2d57-1ac2-cedb-51e6bc3ad90a&iid=102700

Charge Card Write-Offs

If you flip over to page 8 in the earnings report, you can see that the charge net write-off rates jump from 1.4% to 1.9% within 12 months. However, it looks like the 30+ days past due percentage has little change.

My guess is that since the charge net write-off rates have increased, Amex would rather collect interest on outstanding balances instead of writing them off.

By auto-enrolling cardholders in the Pay Over Time program, Amex can earn more interest income instead of chasing after delinquent accounts.

Provisions for losses is money set aside for write-offs. Total provisions for losses jumped from $809 million in Q1 2019 to $1.024 billion in Q4 2019.

It’s no secret that American Express makes a large percentage of their revenue via swipe fees, which increased by 6% in Q4 2019. Other notable increases are net card fees (annual fees) and net interest income.

My prediction is that more people were getting the cards due to good marketing, and they ended up paying interest as opposed to paying the card off in full each month.

By auto-enrolling cardholders in Pay Over Time, Amex is cutting back on potential write-offs and making money on the interest. Only time will tell if their strategy is more profitable.