AmEx Encourages Cardholders to Leave

[question everything]

FEBRUARY 24, 2009

AmEx Encourages Cardholders to Leave
By MARY PILON
WSJ

It used to be that credit-card companies lured customers with cash rewards. Now American Express Co. is paying to get rid of them. The card issuer is offering selected customers a $300 AmEx prepaid gift card if they pay off their balances and close their accounts. The unusual move underscores how quickly conditions have deteriorated in the credit-card market. The current economic morass was provoked by spiking mortgage defaults. But as the economic crisis widens and unemployment climbs, there is growing concern that credit-card defaults will soar into the stratosphere as well.

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Selected members -- the company wouldn't disclose how many -- began receiving letters with the voluntary offer earlier this month, according to Molly Faust, an American Express spokeswoman. "It's a relatively small number of cardmembers who have sizeable balances and little spending and payment activity," she says. AmEx declined to disclose the specific criteria used to determine who is eligible for the offer. However, Ms. Faust did say that it was offered only to retail credit-card holders, not corporate accounts. Customers who received the offer have until Feb. 28 to respond.

Each letter came with an RSVP code that, when submitted online, immediately cancels that member's card. Members have from March 1 to April 30 to pay off their balances and receive the prepaid card. During that time, the balance is subject to the same interest rates and fees that it would be if they chose to keep their card. If customers don't pay off their balance by April 30, they will not get the gift card and their accounts will still be closed, says Ms. Faust.

Closing a line of credit generally hurts customer credit scores, even if the customers do it themselves. As soon as eligible AmEx customers sign up for the offer, they lose all Membership Reward points accumulated while they were customers, Ms. Faust says. That means customers should use up their points before agreeing to the offer.

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AmEx is one of several credit-card issuers that have closed accounts and increased late fees and interest rates for cash advances in recent months. After converting into a bank-holding company late last year, AmEx received $3.4 billion from the U.S. Treasury's Troubled Asset Relief Program in exchange for a stake in the company.

http://online.wsj.com/article/SB123542259989852121.html (subscription)

Printed in The Wall Street Journal, page D2

[Captain Hilts]

1. I thought you couldn't run a balance on an AmEx card. nt

[SoCalNative]

2. They have different types of cards now

including some that are credit and not charge cards. BLUE is one of them where you are not required to pay the entire balance off at the end of the month.