Instead of luring customers with cash rewards, American Express is paying to get rid of customers. They are offering selected customers $300 if they pay off their balances and close their accounts.
Here is the link: American Express offer
This offer is only valid for selected members, those who have a sizeable balance and little spending and payment activity, and it seems to be targeting customers with Blue or Optima cards.
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.
American Express is promoting this a way for customers to “simplify their finances.” Yea right! What they are actually saying is “You are a bad customer; we want to get rid of you. Here is $300 if you pay what you owe and leave.”
There are several things wrong with their plan:
1. Although this move protects the company from credit risk, it reduces the buying power of customers who take the offer; thus, it is will take that much longer for the economy to recover.
2. The offer is ONLY for the worst customers and they are thus being rewarded (sounds a lot like how Obama is rewarding bad behavior for those who took out mortgages they can not reasonablely pay). The payments will be made to risky customers, NOT the the best customers with good credit histories and sizable incomes.
3. 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 (TARP) in exchange for a stake in the company. Now, American Express is using taxpayer money to pay off bad customers.
Interestingly, American Express is aggressively seeking new business from Costco customers. I had stopped by Costco earlier this week. They had an outdoor tent up and trying to get people to get the True Earnings card: No annual fee (except the yearly Costco membership), 1-3% rebates on various things, including 3% on gasoline. They were even offering incentives to sign up, such as a tote bag, free pizza, and other things.
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