Why American Express Cards Impact Your Credit Score Differently Than Others

Do you have an American Express credit card in your wallet?

It may surprise you to learn that it can have a different impact on your credit score than some of the other credit cards you carry.

This is because several of the popular AmEx cards, such as The Platinum Card® from American Express, do not have a preset credit limit. Instead, AmEx regularly adjusts spending power for those cards based on your purchase, payment and credit history.

This can cause an issue with the way credit bureaus calculate your credit utilization numbers, which are a factor for your credit score.

During a recent episode of The Clark Howard Podcast, money expert Clark Howard was asked to explain how American Express credit cards that do not carry a set credit limit impact your credit utilization.

---

Ask Clark: How Does My American Express Card Report to the Credit Bureaus?

Clark recently received a listener-submitted question on the impact that his American Express® Gold card might have on his credit score.

Shaun in California asks:

“You’ve been a great influence on me over the years, and I have used your advice routinely to monitor my credit.

I find Credit Karma to be useful, as it helps break down every aspect of my Equifax TransUnion score, which fluctuates right above and below 800. I always pay credit balances in full, so my credit usage percent is always low.

My question is regarding my American Express Gold Card. It does not have a set [credit] limit, but when I log into AmEx and check the spending power calculator it gives me an available balance of $80,000.

Why is this amount not reflected in my available credit on Credit Karma? Are there any tricks you know that would apply this AmEx available credit to my overall credit available-to-usage percent? It would definitely boost my score.”

Clark’s response:

“Well, first of all, your [credit] score is already great.

What you have to do is you’d have to charge in a month $80,000 on the AmEx Gold. If you did that, then they would have that as part of your available credit moving forward.

Here’s the thing with AmEx cards: Since they don’t have a stated public credit limit, the credit bureaus don’t know how to treat them.

And, so, what they do is they take the highest balance you’ve ever had with it and treat that as your credit limit.

So, if you have never done mega-charging on the AmEx, then what’s reported to the bureaus as your credit limit is much, much lower than what actually is available to you.”

---

Why Does This Matter for My Credit Score?

As Clark described to Shaun in the podcast, American Express does not provide a stated public credit limit for many of its credit cards.

That makes it difficult for the credit bureaus to get a clear measurement of your utilization of credit with this credit card. They use the best data they have available, which is your largest monthly credit usage as an approximated credit limit.

This calculation matters to your credit score because credit utilization is one of the components of your score.

Credit utilization is a ratio of the amount of money that you owe (debt) versus the total amount of available credit that you have on revolving credit accounts. So, for example, if you owed $3,500 and had a total of $10,000 in available credit, your credit utilization ratio would be 35%.

As you’ll see in the illustration below, proper utilization of credit accounts for up to 30% of your credit score (“Amounts Owed” in illustration):

So, in theory, your responsibility with these credit cards (not using your full spending power) may not be reflected accurately in your credit score.

This can make your utilization number for an AmEx card appear higher on your credit report than it is in reality.

---

Do All American Express Credit Cards Follow This Practice?

It’s worth pointing out that not every American Express card practices this adaptable spending limit method.

AmEx has cards, such as the popular Blue Cash Preferred® Card from American Express, that operate like a more traditional credit card with a set spending limit. In those instances, you should see that your credit report reflects a true utilization ratio.

Generally speaking, American Express identifies cards with an adaptable spending limit as “Charge” cards and cards with preset credit limits as “Credit” cards. Typically, you must pay your card balance in full each month with a “Charge” card, while the “Credit” cards will allow you to carry a balance.

You can read more about the differences in these AmEx products here.

If you’re not sure which type of card you have, you should be able to see if your card has a preset spending limit by logging into your AmEx account and viewing your account details via the dashboard.

---

Do you have an AmEx card with no preset spending limit? If so, what are your strategies to get the most out of your credit utilization ratio for this card? We’d love to hear your thoughts in the Clark.com community.