Amex Plum Card Limited Offer For 3.5% Cash Back and Does It Make Sense?

I went ahead and signed up for a new credit card recently: The Plum Card from American Express. It has a sign-up offer going until October 27, 2014 that offers 3.5% cash back on each of the first $10,000 up to $30,000 in the first 3 months. I took it as an opportunity to earn $1050 in cash back. The card does have a $250 annual fee, though it’s waived the first year.

Although cash is king and I like the idea of getting $1050 in cash back, it does take a lot of spending to get there and cash back cards is also not the way to buy first class flights for trips to Asia or Europe or elsewhere. This card also doesn’t have a separate big sign-up bonus like many cards do.  I’ll explain why this card made sense for me and how this card works, but it may not be the best choice for everyone. I’ll also compare it to other cash back opportunities to see how this 3.5% stacks up.

How The 3.5% Cash Back On The Plum Card Works

Until October 27, the Plum Card® from American Express is offering an opportunity an effective 3.5% cash back on all purchases on the first $30,000 spent within 3 the first 3 months. Here’s how it works:

• You get a 1.5% cash back for paying your balance early within 10 days of statement closing.
• For each $10,000 up to $30,000 spent within the first 3 months, you receive a $200 statement credit.

I actually already went through a cycle with this card to see how it all works. I expected the $200 credit and 1.5% cash back to be a little bit difficult to keep track of because it may take a while to post, but it actually wasn’t difficult at all. I made $10,000 in purchases during the first billing cycle. The $200 statement credit posted right away once my $10,000 in purchases cleared so I never had to even pay that. The 1.5% early pay discount actually posts at statement closing. Because I paid $9,000 before the statement even closed, I got $135 for that. American Express was also organized enough to send me an email once my statement closed to tell me by which date I need to pay to get the early payment discount. It was actually all much easier than I expected.

Although keeping track of things is pretty easy, there are a few caveats with this card. First of all, you only get that extra $200 for every $10,000 you spend exactly. If you only spend $9000, you don’t get any of the $200. So the way to think of it is that for every $10,000 you spend, you get $350 in cash. The other thing is that this card has a $250 annual fee. It is waived the first year and does offer car rental and damage insurance, extended warranty and travel accident insurance, but it’s not clear whether those benefits are really worth the $250. I suppose I’ll try out the card for a year and can always cancel if I decide I don’t want to keep it.

Who this card makes sense for:

• Businesses and business travelers with high expenses who are reimbursed by their companies.
• People with high spending patterns who value cash back.

Does The Plum Card Make Sense?

Although 3.5% cash back is nice, it does require a lot of spending in a short period to reap value. It’s very different from a card where you need to spend $1000, $3000 or $5000 for a big sign-up bonus of 40,000 or 50,000 miles. So it really doesn’t make sense unless you actually have tens of thousands of dollars in expenses you will generate the first 3 months. Otherwise, you’re most likely better off with a card that earns a bigger sign-up bonus for less spending so let’s compare to the Bar­clay­card Arrival Plus World Elite MasterCard.

The Bar­clay­card Arrival Plus World Elite MasterCard comes with a $440 travel credit after spending $3000 within the first 3 months and it earns a 2.2% cash back. This cash back credit can be spent on plane tickets, hotel rooms, car rentals, taxi rides or any travel purchase. Although these are technically travel earnings, they’re so flexible and I take enough taxi rides, train rides, meals at hotels that these are no different to me from cash at this point.

So let’s compare the earnings from signing up for a Barclaycard Arrival and signing up for the Amex Plum card. As we can see from the table below, the Barclaycard Arrival’s $440 travel credit immediately gives the card a head start and the Amex Plum card never has a chance to catch up – even after all $30,000 is spent at the Plum Card sign-up bonus is exhausted. Comparatively, the Barclaycard Arrival also continues to earn 2.2% cash back throughout the life of the card and waives a much lower $89 annual fee the first year.

Then why would I sign up for the Plum Card and not the Barclaycard Arrival or even a credit card with a bigger miles sign-up bonus? Well, I am in a bit of a different situation. First of all, I am quite good at using miles efficiently and have all my far-away trips booked for the next year. I just don’t need any miles right now and, when you have enough miles, every incremental mile is essentially useless. On the other hand, cash is king so I am interested in cash back. I’ve also already signed up for the Barclaycard Arrival and gotten that sign-up bonus so that $440 can’t help me anymore.

So what I need to look at is how much I will earn from more spending with the Barclaycard Arrival vs. signing up for the new Plum Card. Once we look at this, we can see I will be $390 ahead by signing up for the Plum Card and that’s the right choice for me.

That said, not everyone is in the same situation and not everyone has already gotten other bonuses. Cards with nice sign-up bonuses are actually much better at rewarding lower amounts of spending. Moreover, the 3.5% bonus on this card is very short term and you’ll only earn 1.5% cash back on the Plum Card after the first 3 months.

Summary

• The Plum Card® from American Express is offering an opportunity an effective 3.5% cash back on all purchases on the first $30,000 spent within 3 the first 3 months.
• For those with high spending patterns, this card can make sense as it can earn up to $1050 cash back.
• Since this card does not have a big sign-up bonus up-front, many people will actually benefit from signing up for a card with a larger sign-up bonus in the short term.