American Express has introduced a new card, “One from American Express” (which almost makes me think of a “Who’s on First?”-style routine: “So what’s the card?” “One from American Express.” “I know, but what’s it called?”) They’re trying to stand out in a crowded market by pitching it as the card that helps you save. Not save as in discounts, save as in 1% of your purchase value is placed in “an FDIC-insured High-Yield Savings Account in your name,” offering around 3% interest.
While I applaud the straightforward approach to rewards (points and double-points and such pale to cash) I find the whole campaign somewhere between a wildly optimistic trip to MarketingLand and just plain idiotic. For example, the ads ask “Any way we can spend and save at the same time? There’s one.” Oh really? Here’s a tip: if you buy something for $100 and later you get $1 back, you’re not “spending and saving at the same time”, you’re spending a little bit less. You’re not really “saving” at all, you’re just getting a rebate with interest.
Now I can imagine one scenario where this makes sense. If you use your card exclusively for things you would need anyway, such as gas and groceries, and you religiously pay it off when due, you might find it worth the trouble to pick up a penny on the dollar. Except… whoops, there’s an annual fee! Yes, your spending+saving card will cost you $35/yr. So in reality, you don’t see any benefit until you’ve spent$3,5001 on the card.
So let’s see: spend a dollar, get a penny — after you’ve spent 3,500 dollars. Or hey, how about this: just take two twenties and put them in the bank.
1 Technically, you could front-load your spending to the first week of your annual cycle, and accrue interest on that such that you realized $35 in interest on roughly $3,400, depending upon when interest was compounded.