AmEx encourages cardholders to leave

Yesterday I received several urgent e-mails informing me about American Express offering a $300 gift card to certain cardholders that pay off their balances and close their accounts.  I wasn’t surprised the least bit at the latest panic move by AmEx, and I didn’t rush to post a link to the Wall Street Journal article.  I simply said to myself: “I’ll get to it tomorrow.”

It’s not that I have become numb to such news or that I do not care.  These types of stories will become more common; they are the new rules of the ever-changing game.  I expect more ill-considered offers like this as the credit market worsens and credit card companies invoke the clauses in their unilateral contracts. Credit card delinquencies are at their highest levels in five years due mainly to the recent spike in unemployment. Some analysts say that default rates will reach double digits as the economy continues to contract.

In a move similar to AmEx’s, Chase offered cardholders with a 29.99% interest rate a lower rate of 27.99%.  By taking “three easy steps” according to a January mailer, targeted cardholders had to signup for automatic payments, stay within the credit limit for the next 12 months, and have no return payments over the next 12 months.

Such offers, as suggested in the first draft of the Wall Street Journal article, do not make much sense and are almost insulting.  The choice offered is a classic example of the economic term “adverse selection”.  Scott Valentin, an analyst at FBR Capital Markets, put it best: "The risk is that the ones that take $300 and close their balances do have the ability to pay, and the ones left behind that don't take the $300 anyway couldn't afford to pay off their balance."

This offer is likely to have a small number of participants and is banking on those ignorant of the devastating consequences of closing an account –a lower credit score by as much as 100 points.  The smart consumers know that the opportunity cost of taking the gift card is too high, especially in this economy.  Regardless, the offer certainly identifies the lowest rung of customers –those who the company wants to get rid of regardless of their ability to pay. 

Comments

[Michael E.]

To whom it may concern, or Kevin Johson,

We watched you on the media and on youtube about the credit card companies profiling and hoarding interest from people like me and you that have good credit history and a stable financial structure and my question is that how are you moving forward with this case because my wife Lisa is the only person working in this household and she is very good at paying bills on time especially our credit card bills.

The problem is about 3 or 4 of her credit cards have reduced her limit I thought we did something wrong which didn't make sense because her credit score is as good as yours. She has been a registered nurse for 16 years and about 4 years ago she asked me to stay home with our only daughter so having this credit card limit changing limits is hurting our financial stability mainly because her interests rates just went up and payments went up along with that after the credit card companies just suddently reduced all her limits.

Do you have any suggestions or advice on what we should do? Should we get a lawyer and represent us against these credit card companies practically robbing the people of america especially the ones that are good to them?

Thank you for any information that can fight this battle against the credit card companies.

Let us know as well if we can be of any help to stand up for this case. We will provide any information you might need to help battle the unfair policies.

P.S. Not only AMEX is doing this but Mastercard as well. Both have lowered her limits suddently without warning.

Michael

[Kumar]

Craig Anderson, I don't have a specific AMEX e-mail address to write to. I just log into AMEX on the internet and there is a "contact us" link on the AMEX website. You have to look really hard because the "contact us" link is written in small font. I notice that all websites do that - except maybe this website, newcreditrules.com which put the "contact us"/"E-mail Me" link in an easy to find location.

[Holly]

Daniel B,

With all due respect, what are you doing on this site? Clearly, what you don't realize is that AMEX is "profiling" people based on where they shop and who their mortgage is with....AKA "Redlining" (which is illegal in the Mortgage & Insurance Industries).

Just as I thought....you have not yet been "profiled" by AMEX. Please feel free to return to this site when/if they cut your credit line for no reason.

I too, paid in full and ALWAYS on the due date. I was fanatic about the due date, which in my case is the 24th of the month. I would phone my payment in as a debit to my checking account no later than the 22nd or 23rd of each month. Once or twice instead of paying in full (depending on my cash flow) I would pay "x" thousands of dollars on the 24th...then phone in the balance of the payment of "x" thousands of dollars again a couple of weeks later. Again, that was only once or twice, period. The rest of the time even if the balance was $12,000 -- they were paid in full. My point is -- I am not living on a credit card balance. My card is a Delta Sky Miles Account -- so if I'm going to pay for anything ie...utilities, shopping, food, whatever the money is coming out of my bank account, right? Why not get a frequent flyer mile for that dollar I spend? It's not a matter of financing my lifestyle or "living beyond my means"....when I travel, I fly First Class for free.....I either write a check & get nothing or I charge everything and get to fly free and pay one bill every month (the AMEX). By the way AMEX was my only card, if a merchant did not take AMEX I either paid cash or wrote a check.

Back to profiling....AMEX has admitted to "profiling" people based on where they shop and where they live. Let's say, Daniel B, that your Mortgage is with the ABC Company and they sell your Mortgage to the XYZ Company (you have no control over that...right?). Now you go to use your AMEX card and it declines....remember, you paid in full -- what could possibly be wrong? Well, Daneil B., "PEOPLE WHO HAVE THEIR MORTGAGES WITH THE XYZ COMPANY DON'T PAY THEIR BILLS, THEREFORE, WE (AMEX) ARE TAKING YOUR CREDIT LINE AWAY". Now, your Mortgage is current and always paid on time, your Credit Score is 759 (as in my case)....are you catching on yet? If not, let's suppose you shop in a "certian" store, where AMEX says other people who shop there don't pay their bills, so AMEX decides you might not be able to pay either.

Now, don't get the funny idea that this "suburban woman" doesn't pay her mortgage, because in fact, my Mortgage is "In House" at a local bank where I have a very long term relationship...so I'm not in the secondary market and I pay my mortgage on time every month (I have owned my 4,000 sq ft home since 1991 = 18 years) --again -- not living beyond my means as you have accused me of, I happen to have gobs of equity in this home.

Your creditworthiness and your experience with AMEX should be the sole determining factor regarding your credit line.....not what someone else has done or might do. That just is not the case. So before you start judging people without any foundation, why don't you read ALL BLOGS on this site (under each story and at the top of the page "Post your Horror Story". If that doesn't satify you go to the New York Times and under the search bar type in "American Express" and read articles. Watch Kevin's viedo posted on this site where Good Morning America did a story about this. Go to MSNBC web site and use the search bar for "American Express".

Finally, when AMEX makes a UNILATERAL decision to remove your credit line, it diminishes your credit score because your balance to limit is at the max, and your high credit to credit limit has exceeded -- both of those things impact your score. If AMEX decides to close your account (as they have with many people) -- that too, effects your score. Your credit score is used not only to obtain new credit -- but if you want to re-finance your mortgage your interest rate will be effected by your score and your insurance premiums will also be effected by your score.

At this point you owe an apology to all of the people here who paid their bills on time and in full and were profiled.

In closing, I hope your card does not decline after you make your payment!!

[Daniel B.]

Oh and Holly...THANKS. It is revolvers like you that AMEX is able to offer me so many free services (extended warranty, purchase protection, etc) even though I pay no interest or annual fees. THANKS!!! :) Living within your means (pay credit cards in full each month) ...GOLDEN.

[Daniel B.]

Yep, AMEX customer for ten years. Always pay in full and the day afer the statement cuts. I don't revolve credit card balances... that is for people who let their self-conscious control their life and money (THAT IS WHY THEY ARE IN DEBT). Lead the sheep to the slaughter (those who live their lives to other people's satisfaction)...in other words...most suburban women (regardless of race) that I know and have meet in life.

[Holly]

Daniel B,

Wow...thank you for your concern for me.

I am interested in hearing your AMEX story???? Or can you even get a credit card?

[Daniel B.]

Holly, you need to get off your high horse. You seem to be another suburban woman with a delusional belief of self-importance.

[Craig Anderson]

Kumar, what e-mail address did you use? I have a question for them too? I didn't know I could e-mail. Thanks for any help.

[Kumar]

I wrote to AMEX, regarding the offer to close the account for a $300 gift card. AMEX is pretty prompt about writing replies. I did not ask about closing my account but either way I was told I am not eligible. I took out the name of the AMEX representative out of respect for their employees. My fight is not with AMEX customer service but what I feel the anti-consumer business practices at AMEX. Below is their reply to me:
-----------------------------------------------------

Thank you for your e-mail.

We have received your inquiry about the Balance Pay Down Initiative from American Express.

A relatively small number of Cardmembers who have sizeable balances and little spending and payment activity were recently contacted regarding this voluntary promotion, which expires February 28, 2009.

These members have from March 1 to April 30, 2009 to pay off their balances and receive a prepaid gift card. During that time, the balance is subject to the same terms and conditions already present on the account. An additional term of this offer is that acceptance cancels the Card, effective immediately, meaning no further use of the Card is permitted - this would include any existing American Express Bill Pay enrollment.

Further, upon acceptance of this offer, any accumulated but unredeemed cash rebates and/or Membership Rewards points would be immediately forfeited. (Complete program details are included in the documentation accompanying this offer to eligible Cardmembers.)

The intention of American Express is to help our Cardmembers lower their debt and encourage responsible management of their credit. This initiative is a way for these customers to simplify their finances.

Currently, this offer is not available for your Card account.

We appreciate your interest in this promotion and your status as a valued Cardmember of American Express.

Sincerely,

Email Servicing Team
American Express Interactive Services

[Holly]

I have a Brilliant Idea.....instead of us closing our accounts -- How about AMEX closing their doors!!

They are simply prolonging the inevitable

I love hanging in there with a balance due to them, in my opinion...they deserve it. I will pay the minimum due until they resolve my credit reporting issue or I die....whichever comes first. I will not budge!!!!!! No way, no how!!!!! I really don't care how much interest I pay on the debt, it's the principle of what they did to me.

You can't put a price on the integrity THEY stole from me the day my card declined when I had paid the bill.........there's a price attached to that and I AM IN CONTROL, I hold their money that they want and need!!!!!

They THOUGHT they were in the drivers seat when they yanked my credit line for no reason....well, AMEX guess what....skippy the punk left town!!!

[Jon Kepler]

Wow, talk about preying on those at the bottom, huh? I'm sure glad I'm not an Amex shareholder right about now.

[Kevin D. Johnson]

A two percent decrease is not much as you said. To call it a deal would be to add insult to injury. What gall!

Thanks. I am glad to help people better understand how to take action which often means finding a different bank.

[Carole May]

So Chase is offering cardholders with a 29.99% interest rate a lower rate of 27.99%? Gee, isn't that great since they recently jacked up their interest rates to those levels from 12.99%. I did the Suze Orman Debt Eliminator program on her website and Chase is the first card I'm paying off completely. They bought out WaMu which was a terrific bank until they got a hold of it. I'm moving my checking and savings out of there as well, and opening new accounts at a local credit union. I have had it with banks.

I'm looking forward to your article on credit unions, Kevin. Thanks once again for the terrific job you are doing with this website. I read it every day.