Does American Express Not Care About Reputation at All?

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A couple of months ago, media reports slammed American Express for canceling slews of customer accounts, seemingly at random and out of the blue. Now, they’re offering some customers $300 to pay off and close down their accounts. From the CreditMatters blog:

New York-based American Express will give you a $300 American Express prepaid card if you agree to say goodbye. American Express says that it is making this “deal” so that customers can “simplify” their finances. Sure. The offer, which isn’t available to everyone, requires a 14-digit RSVP code. Customers are receiving this offer via U.S. Postal and email.

You may be wondering why American Express doesn’t just close the accounts of these customers, which would save American Express $300. Here’s why: the $300 prepaid card is acting as an incentive for the customer to pay down the balance in an expeditious manner. The customer has exactly two months to get that balance paid off; if he or she does, the $300 card is theirs. Not a bad strategy by American Express.

Does the bribe mean that American Express wants to get rid of its less reliable customers? Not exactly. The Wall Street Journal says that people with excellent credit scores might actually be targets:

Ironically, an excellent credit score can actually serve as more of a bulls-eye than a shield, says Dennis Moroney, a research director and senior analyst for consulting firm Tower Group. He says banks figure they can limit cardholder backlash by targeting consumers with few debts and plenty of other accounts. That way, a closed account won’t have as much of a detrimental effect on their creditworthiness.

The article goes on to illustrate how one woman had her AmEx card canceled during her vacation, which left her stranded.

Americans spend a lifetime building up good credit. It is inane that a credit card company can close your account at whim–which will reflect negatively on your hard-earned credit score–refuse to warn you, and indeed target you for closure because it feels that you can handle the hit. It’s an abysmal way to handle customers, especially in light of the fact that the company is TARP-eligible (eg. the government will bail it out if necessary).

Will people go back to American Express after this? Does American Express, which has a strong international presence, even care about its American customers anymore? Credit card companies have always behaved badly, but this is breaking new ground.

  • Credit card company policies could affect other financing, such as a home mortgage, because of the new fico formula penalizing credit scores from closed accounts or lower credit limits.

  • john

    I’d also like to make a complaint about BestBuy who closes your account after 6 months of no activation without notice. Again, a “new policy” they have implemented which only hurts your credit score to open a credit card and have it later closed on you in which you have to re-open — all the meanwhile the consumer is in the dark. Please get this one going to…

  • JoyfulC

    One thing to consider is that Amex has long sold its charge card on the “no monthly limit” feature. In an economy like this, that could turn disastrous on them very quickly. I don’t blame them for trying to bribe customers into giving up their Amex cards. $300 spent today might save them thousands down the road.

  • pat

    I hope the American People see American Express for what they are, and leave them! I have been with American express for about 14 years. I have five accounts with them. I have never been late on a payment . Not once in 14 years. And last year they started taking all my credit away from me. Once they turned all my cards off with out telling me. My manager went to get some inventory for the store and said her card no longer worked. She was right, and i was out of town and no way to get her money for the weekend. Lost a lot of sales that weekend. Thanks American Express ! There is alot more to this story. To much to write. But i can say this . I have been paying off the cards and getting rid of them . I will never use AMERICAN EXPRESS AGAIN!!!!!

  • snidewoman

    PLEASE if American Express has cheated you out of your reward points and damaged your credit WRITE YOUR CONGRESS REP…Tell them NOT to bail out a company that is causing harm to the economy.

  • AXE AXP!!

    Don’t use this card if they lowered your limit use another card, punish them they way they punished you!