American Express Buying Out Cardholders

February 24, 2009 RSS Feed Print

It's another sign that the average American is in for a long stretch of tighter credit: On Monday, the AP reported American Express would offer some of its members $300 in exchange for paying off their balances and closing out their accounts. 

Douglas A. McIntyre of 24/7 Wall Street says that won't be a plus for the economy:

Between the lines, that means that customers who are not likely to pay their balances are being dumped. That means more people in the economy without access to credit, which means less consumer spending.

No one expects Amex to put patriotism above profit, but as banks and credit card companies cut loose a large portion of their customer bases, the time it will take for the economy to recover will be stretched further into the future.

Also, while AmEx has been shifting its customer base toward more middle-income customers for a while, it's still widely associated with a better-heeled clientele. Makes you wonder what we're in for in the rest of the credit card space where lenders extended excess credit to a larger pool of riskier borrowers.

As for AmEx shares, last week saw several analysts downgrading their outlook for the company. Standard & Poor's kept its "sell" rating on the stock and cut its price target on the company by $3 a share to $11. UBS also lowered its target from $20 a share to $13 with a "neutral" rating, and predicted "severe earnings pressure" for the credit card sector in 2009. AmEx shares are trading at $11.57 this morning.

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I had been a loyal Amex customer for nearly 25 years with no incidents; paying off my bill every month. I actually carried no cash and simply used only the card. I had some situation with real estate escrow which was sent to credit reporting agencies. The situation was a mistake and quickly resolved. However, Amex instantly cancelled my account and did not even attempt to notify me; I was merely rejected by a merchant while trying to use the card. At that moment I owed a whole $250 that was not due for approximately 2 weeks. Amex said they have a right to cancel my credit whenever they find it necessary. One would think that a 25 year relationship would not be instantly destroyed but that is my story.

Harlan R. Siegel of OH 1:03PM February 24, 2010

I own a business and use the amex card for over 2 years now, paying it off every month. I get an email saying it was canceled. R u kidding me!!! They canceled my card because I attempted to make a purchase at my own business!! This is absolutely ridiculous. They couldn't reinstate it because it was just "a computer" that decides if should be reinstated or not. Now, thanks to AMEX, my credit is ruined and i have to reapply for another friggin card. I don't think so, AMEX lost my business and I have decided to NO LONGER accept AMEX at my business either!

Alison of FL 11:27AM February 11, 2010

Another unhappy AMEX user here. Just got my Gold card 2 weeks ago and guess what. Tried to pay for a repair bill costing $2700 and they suspended my account. When i called them, the 1st guy said, oh, you've incurred 300 dollars in the first week and you should pay it off first before we could unsuspend the account. I was like "What?". That isn't until end of December and it's only 22Dec. I got cut off due to bad reception and when i called back, this lady said that it was essentially my fault that the card got suspended. I applied for more credit cards after my AMEX card got approved. Firstly, my other credit cards got approved (Target & Gap for god's sake). Secondly, i never had any issues using the card prior to that payment! Why should this be any different? Of course, the car repair bill would trounce any normal restaurant bill. Doesn't this make sense? No, in fact they told me that i had to pay $25 to unsuspend the account. I was livid. I was being penalised to use the card. The girl got her manager, Marvin to speak to me and offered me a asinine solution "Pay us $1500 by wire transfer and i'd speak to my boss to have you unsuspended." I was taken aback. If i could make my way to a bank to transfer the money, i would not need to call AMEX to resolve my issue. I would simply withdraw the money needed for payment and be done with it. In the end, i used my trusty Citibank debit card to pay off the sum of 2700, peanuts compared to what i spend on any of my other credit cards monthly. AMEX is without a doubt, the worst financial institution ever. My contention is that if i was deemed a poor payee or had poor credit history, then why in the world did they issue me a Gold Card? Poor planning, poor customer service and an extremely poor decision engine. In a way, it's good that they did this. Otherwise, we wouldn't have bottom dwellers. Keep it up AMEX.

sacraligious of CA 3:23AM December 23, 2009

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Kirk Shinkle is a senior editor at U.S. News. He writes daily about ups and downs in equity markets, sectors and stocks. Formerly, he covered business and economics on both coasts for Investor's Business Daily.

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