AmEx Flexible Payment Option: Worth Signing up For?

Several months ago, I received a call from an American Express representative offering me the Flexible Payments Option. The option sounded like a great idea at the time: a complimentary service that lets you defer payment for purchases over $200 on your charge card. According to the AmEx website, here's how it works. Your payments are divided into two categories: for small payments, your card acts as a charge card and items must be repaid in full. For larger purchases (over $200), your charge card can act as a credit card by allowing you to spread payments over time, instead of having to pay them off in full each month. Because enrollment is free, I signed up for the service and didn't think too much about it.

Last weekend, I left my AmEx at the Terminal 5 bar during a Cut Copy concert, and had to call customer service to order a new card. The customer service rep asked me if I wanted to keep my flexible payment options in tact. I said yes, but decided to do a little digging to discover if this plan seemed to to good to be true, and how American Express stood to benefit. Here's what I found out:

While American Express lets you temporarily suspend payment of purchases over $200, it wants you to pay off these items sooner rather than later. Because charge cards are supposed to be paid in full, AmEx charges a relatively high credit card interest rate (or APR) if you choose to utilize the flexible plan option. According to SmartMoney:

Each month, you must then pay your regular charges in full, plus the minimum payment (the greater of $20 or 1/50th of the balance) for the revolving charges. The remaining flexible balance accrues interest charges at a variable rate, typically the prime interest rate plus 9.9%, or 15.4% based on today's current prime rate of 5.5%. That's more than the average for variable-rate credit cards, which these days carry an average APR of 13.5%, according to Bankrate.com.

The verdict? Consumers who select charge cards do so because they want more control over their expenses. Those who want to spread out their payments over time would do better ditching their charge cards/flexible plan option and signing up for a standard credit card.