Do Amex charge cards count towards utilization?

Do American Express Charge Cards Affect Your Credit Utilization?

American Express (Amex) charge cards are often confused with credit cards, leading to questions about their impact on credit utilization—a crucial factor in your credit score. The short answer is: no, Amex charge cards don’t directly affect your credit utilization ratio.

Unlike credit cards, which have a pre-defined credit limit, charge cards don’t have a revolving credit line. You’re expected to pay your balance in full each month. This fundamental difference is key to understanding their impact (or lack thereof) on your credit report. Credit utilization is calculated as the percentage of your available credit you’re currently using. Since charge cards don’t provide an available credit line in the traditional sense, there’s no available credit to calculate against. Therefore, your spending on a charge card won’t increase your credit utilization percentage reported to credit bureaus.

This doesn’t mean charge cards are irrelevant to your credit health. In fact, responsible use of a charge card can significantly benefit your credit score. The critical factor is consistent, on-time payment. Your payment history, representing approximately 35% of your FICO score, is heavily influenced by your payment performance. Paying your Amex charge card balance in full and on time every month demonstrates financial responsibility and builds a strong positive history with credit bureaus. This diligent payment behavior outweighs the absence of a credit utilization impact from the card itself.

Consider this analogy: a charge card is like paying cash; your spending doesn’t directly impact a credit score-related metric. A credit card, on the other hand, functions as a loan; your spending affects your utilization ratio. However, just because your charge card doesn’t directly influence utilization doesn’t negate the importance of timely payments. Consistent payment history on any account is vital.

In conclusion, while Amex charge cards don’t contribute to your credit utilization ratio, their responsible use—specifically, consistently paying your balance in full and on time—is a powerful tool for building a positive credit history and improving your credit score. Don’t let the absence of a credit utilization factor mislead you; diligent payment behavior remains paramount for maintaining excellent credit.