Pay more for less at American Express

This guest post comes from Frank Curmudgeon at Bad Money Advice.

Investing was actually my second career. For the six years between college and B-school I wrote software. Back then, we Dilberts had a phrase we used to parody the marketing types who sold what we made. "It’s not a bug, it’s a feature!" In other words, that obvious flaw in the software is not, in fact, a mistake that makes it less useful, it is a brilliant design decision that actually makes it better and worth more to you, the customer.

• Bing: Worst credit cards

I also, at this time, had an American Express card, paying, I think, $50 or $75 a year for the privilege. I honestly forget why. I think I got it while still in college under some kind of special deal. And there was this store I frequented that in those days only took AmEx. Anyway, by the time I was 25 I came to my senses and canceled the thing. They sent me a nice letter saying that if I ever came back I could still have a card that said "Member Since 1986."

So I’ve got that going for me.

I was reminded of both these things from my past by a brilliant new marketing campaign from American Express. For those of you not familiar with such things, let me explain that the conventional AmEx card is not a credit card but a charge card. That is, they do not provide credit for longer than it takes them to send you a bill. You are expected to pay the full balance every month.

• Quiz: Calculate your credit score

I hate to say this about a fine old American company, but it is not clear to me why American Express still exists. The traveler's checks and even the travel agency businesses are selling buggy whips. And who would want the charge card? It costs more than a Visa/MC, is accepted at fewer places, and comes without the option of not paying your bill in full, should the need arise.

Silly me. That lack of a line of credit isn’t a bug, it’s a feature. You see, with a credit card you might run up a balance, and that is bad. With a charge card that won’t happen. So it’s worth paying more for.

How much more? As it turns out, $25. That’s the annual fee on the new Zync card that AmEx is flogging to young people. "Customizable like your playlist." Apparently, having run out of precious metals to name cards after, AmEx has been reduced to misspelling non-precious metals. The card seems to be a very pale blue on their Web site.

Alternatively, a person could sign up for the Blue from American Express, which is accepted at exactly the same places as Zync, has the same rewards program, and the same extended warranties and other assorted benefits of questionable value. The big difference being that Blue is a credit card, meaning you will have the burden of being able to carry a balance from month to month. On the plus side, there is no fee.

I have already admitted here that there is something, maybe many things, I just don’t get about cards. But really now. Isn’t this just a little nuts? Isn’t it like the used-car dealer who tries to sell a car that can’t go over 65 by pointing out all the money you will save on speeding tickets? Not being able to borrow money is a feature? That you should pay more for? Really?

Related reading at Bad Money Advice:

• My debit card confusion
• Some more things I don’t get about cards
• Cash is not king