Amazon (NASDAQ:AMZN) and American Express (NYSE:AXP) recently announced a partnership to issue new business credit cards. In addition to an industry-leading rewards rate on Amazon-company purchases, the cards also offer a unique way for businesses to manage their cash flow.
In this segment from Industry Focus: Financials, host Jason Moser and Fool.com contributor Matt Frankel, CFP, discuss the partnership and why it could be a big winner.
A full transcript follows the video.
This video was recorded on Oct. 29, 2018.
Jason Moser: Lastly, we want to talk a little bit about American Express tying up here with Amazon. If I'm reading correctly, this is primarily a business relationship from what I can see. The one thing that I found noteworthy was, it didn't look like there was any type of annual fee involved with this relationship. American Express is pretty notorious for that annual fee. Talk a little bit more about the American Express and Amazon tie-up, and what exactly that's going to mean for both companies.
Matt Frankel: This was actually probably my favorite announcement there just because I'm a huge Shark Tank fan, and Barbara Corcoran was the spokesperson giving this announcement.
Moser: It's a good show, I like it too!
Frankel: On a personal level, I really enjoyed this announcement. You're correct, it's a business card. This is not a personal credit card product. And yes, it's no annual fee. But the most unique thing is that cardholders have a choice -- on one hand, Amazon Prime members could choose to get 5% rewards on any Amazon purchase, including Whole Foods; or, they can choose to have 90-day payment terms. What's really unique about this is, this is not just 90-day interest-free payments. This is 90 days of no payments, meaning that you charge something, and you're billed without any interest comes due in 90 days.
This is a really big benefit for businesses that have cash flow issues. Let's say you sell something to somebody. You need to finance the cost of goods to make whatever you're selling, but then you're not going to get paid for a couple of months. This really allows you to manage your cash flow so much better without that extra expensive credit card interest, or any payments due at all, until your receivables come in. I don't know of any other credit card that has zero payments for 90 days. There's a lot of interest-free credit cards, but you're still to make minimum payments along the way.
That was the big takeaway I saw. And, it's a no annual fee product, and 5% cashback if you choose that route. It's a great rewards rate for a no annual fee credit card to begin with. There's a couple of big perks to this for small businesses.
Moser: That's a couple of really a behemoth companies in the space, and it looks like they're tackling what is a problem with a unique and compelling solution. I have to believe that they should gain a little traction with that.