My Comment on MSN Smart Spending Blog

I left a comment on MSN Smart Spending Blog. I am reposting that comment on my blog so that everyone can read what I think about American Express' recent $300 gift card offer to close accounts. Enjoy and leave a comment for me.

AmEx paying cardholders to close accounts
by Karen Datko

Remember the days when credit card companies used to reward people for signing up? Now, one company, American Express, is offering cardholders $300 to hit the bricks.

AmEx paints this offer as a way to help customers get control of their finances. We're not buying it, and neither is the blogger at CreditMattersBlog.com, who wrote, "The ‘we want to help you simplify your finances' language is a joke, of course."

Apparently AmEx is hoping that the customers who get this offer will take the hint: We don't want your business anymore.

If you get the "invitation" and decide to enroll, your account will be closed immediately. You also have to pay off your balance by April 30 or forfeit the $300 prepaid card. Any rewards points not used before you sign up will be lost. (See this AmEx Web site for other conditions.)

The deadline for enrolling is the end of this month.

As we've reported here, AmEx hasn't distinguished itself lately in the area of customer relations -- slashing credit limits, for instance. (Update: AmEx told The New York Times it will stop using "spending patterns" as a justification for reducing credit lines.) And there's a reason for that. Bloomberg reports, "American Express, which got $3.39 billion from the U.S. Treasury to boost capital, said last month that fourth-quarter profit from continuing operations fell 72% to $238 million as more consumers defaulted."

To stop that slide, the speculation is, it's offering cardholders a $300 incentive to make their AmEx balance a priority over other debt.

"What AmEx is trying to do is move to the front of the line in terms of getting paid back," Michael Taiano, an analyst at Sandler O'Neill & Partners, told Bloomberg.

AmEx won't say how many customers have gotten the $300 offer or how they were selected.

"I wish AmEx would make me this kind of offer. Instead, they cut my line from $15k to $4k, then down to $1k, in the span of a few months -- despite me paying the balance in full every month and never having a delinquency," said reader Bob at The Wall Street Journal's The Wallet.

Will this offer work?

"The glaring question here is whether the only people who will take advantage of this are the kinds of paying customers AmEx would like to keep for the long run," wrote Tom Petruno at the Los Angeles Times' Money & Co.

Dustbury.com said, "How many of these folks will come back to AmEx when times are better? Yeah, that's what I thought."

My Comment:

Over the past few years, Amex's customer service level went downhill. It has been an all-time winner of the best credit card company in the world. They have outsourced their customer service units and their e-mail response time now exceeds 24 hours. No matter what the critics say, we all know Amex is still the best credit card company as mentioned by the J.D. Power & Associates. Here's why: other credit companies slashed their service levels so much that Amex still shines out of them.
This $300 offer is one of the biggest management mistakes Amex has ever made. First of all, because of this offer, Amex's name was all over the media as a terrible company. Then, this offer will not work for sure. No wonder no other company is willing to follow its footstep. I have been a member of Amex since 2004 and make every single payment on time. Despite the recent credit line cuts by Amex, they have not cut my line. So, this is my point: that offer only went to cardholders who revolve their credit lines and their credit scores are below 680. Also, I know that those holders owe at least $1,500 on their cards. I actually wanted to get this offer and tried to ask for it. The answer was no. Now, you know they are keeping all deadbeats like me and want to get rid of revolvers. I highly doubt that people will pay off $1,500 for a $300 gift card because if they had the money, they already paid Amex back. Good luck finding cardmembers to pay off.