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“American Express has lost its mind”

August 17, 2009

creditOn Oct. 1, the annual percentage rate on Mike Golden’s American Express Platinum card will jump by about 25 percent.

Yes, 25 percent. That’s no typo.

Since American Express has always billed itself as the traveler’s best friend (“Don’t leave home without it”) I thought this would be of interest to other readers. The Credit Cardholders’ Bill of Rights Act, the new law meant to protect credit card customers from surprise fees that goes into effect next year, is supposed to protect cardholders from these kind of rate changes. Did Amex send out the wrong notices?


Here’s what happened to Golden, who starts his note with the declaration, “American Express has lost its mind.”

Effective October 1, 2009, the rate on my Flexible Payment (Sign and Travel) Plan will increase to prime plus 11.99%, or (in finer print on the back of the letter) a current rate of 15.24%.

Calling them, I confirmed that this 3% rate increase (my current rate 12.24%), equivalent, percentage-wise, to a 24.5% increase, was sent to all Platinum card holders without regard to credit history or experience, and, would be applied on 1 October to all outstanding Flexible Account balances; i.e., retroactively to charges made while the earlier rate was in effect.

I asked American Express if Golden’s assertion was accurate.

Charge cards are pay in full products at the end of the month and that is the way the product is intended. We do offer some Cardmembers the ability to revolve some charges if they are eligible to enroll in the extended payment options we offer, such as Sign and Travel, we are sending notices to some not all Cardmembers through a letter that we are increasing APRs on those products and those APRs are increasing about 2 to 3 % points.

Again, this is not a change all Platinum Cardmembers are getting. But for those getting a rate increase the rate is prime + 11.99. Again, the charge card is not a revolving card but the service is meant to be used for convenience, we recommend that Platinum Cardmembers who want to revolve charges with frequency apply for a Blue free lending card that they can link to their current rewards program.

In other words, it’s not as bad as Golden thinks it is.

Still, raising interest rates before H.R. 627 goes into effect in February certainly appears to be an effort to slip a rate change under the radar. Is it legal? Sure. Should Amex have done it? That’s debatable.

We’ve seen quite a few credit card mischief in the last few weeks, from rate increases to funny math with currency transaction fees. My best advice is to be vigilant and to report anything out-of-the-ordinary to the government, Better Business Bureau, or yours truly.

Christopher Elliott is the author of Scammed: How to Save Your Money and Find Better Service in a World of Schemes, Swindles, and Shady Deals. Critics have called it “eye-opening” and “inspiring” — it’ll “grab your attention and won’t let go.” Order your copy now on Amazon, Barnes & Noble or iTunes.

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25 comments

  • TOM BROLLINI

    We just received a letter from AmEx raising our APR & increasing late fees on our Platinum Delta SkyMiles card.

    I just wrote them a letter saying to cancel the card effective the day before its annual due date. (which is comming up soon)

    I also told them where to put their card.

    We’ve had AE for 20yrs with never even a late payment. They can kiss my butt.

    Everyone needs to stand up to these jerks! Cancel your cards!!!

    Use the business that are customer FRIENDLY!

    I’ve never liked AE very much anyways. They have always been difficult to work with. The only real reason was Costco & the miles.

    Things are getting worse with these guys, not better.

  • Jim Lamb

    American Express had indeed lost its mind! My intent is to pay off my card as soon as possible, taking money out of a savings account that is reserved for emergencies, and paying this off.

    AmEx has shown that in these difficult times, that they DO NOT care about their card holders. I am seriously considering cancelling ALL of my cards with them. I have been a loyal customer for 30+ years!

  • Bob

    I’m pretty sure that everybody saw this quick repricing coming from a mile away.

    To everybody who revolved a balance: use this as a blessing in disguise and pay off some credit card debt, and stop buying things you can’t afford!

    Your long term financial health will thank you.

  • SirWired

    Chris, I think you have been mis-led by the wording of the OP, or at least you repeated it without thinking. They increased their rates by 3%, which is not a particularly big deal. Yes, it would be nice if the rates didn’t go up at all, but a 3% bump for an account is not the end of the world.

    To list the increase as a percentage of a percentage is just silly. When the interest on a savings account goes from 2% to 3%, nobody goes around saying that “interest just went up by 50%.”

  • http://www.webworkerdaily.com Nancy Nally

    Amex isn’t the only one pulling this stunt in advance of the law going into effect. I just got notice from Citibank that they are raising the rate on my Mastercard I’ve had almost 25 years and which I have paid off every month for the past several years. The variable interest rate is currently at 15.24% on it. They are changing it so that the variable interest rate is the prime rate plus 13.99%….but with a minimum APR of ***19.99%**** so if the prime is below 6% I still pay 19.99%!

    And Citibank doesn’t have the excuse that they are a charge card that is designed to be paid off every month. These companies are exploiting any loophole that is left to them in this law to take their anger out on customers about this new law that customers demanded placing restrictions on them. They are making these changes to try to force the gov’t to repeal this law, I believe, by showing that they can do worse things than what they were doing previously if pushed. Either way, they win: they either make a ton of money from giving the shaft to consumers or they force the govt to repeal the law.

  • Jake

    They’re not the only ones. On my Chase card I received a statement a few months back with $0 due – made sense as I really only used it for one recurring charge that fell right around the statement date. The next month they tried to charge me finance charges and interest…after having it removed once, they put it back on the next statement (gotta love that double cycle billing!). Called them up again and they held firm, so I told them what they could do with their card, right before I filed a grievance with the FTC for their deceptive practice. The actual amount was small, however my thought was if they do this across hundreds of thousands of customers it was a decided undeserved windfall…

  • John

    Time out ….
    AMEX is a charge card not a credit card. By definition, that means that you should not carry a balance month to month and therefore no interest. It is not a means of borrowing money. Its an alternative form of cash.

    The fact that they allow you to carry a balance in emergencies should be something that they get a pat on the back for not something that people get mad about.

    If you want to carry balances and borrow money, get a visa or mastecard. That’s what they are intended for.

  • Jon Bergen

    I’m with Tom, I had a Delta Sky Miles card. I had a $26K credit limit and though my economic circumstances have not changed apart from about 3 years ago getting completely debt free, so used AMex as it was intended instead of rotating credit, they kept moving my credit limit down and down so that over 3 years it went form the $26K to last month at my renewal they did the final drop to a $500 limit with a $98 annual fee… When I have questioned it in the past they claimed the credit agencies have given me a bad report thus the need to lower it and when I got the written report from Experion who Amex uses the report shows no negative data of any kind. When I sent it to Amex they said that they could do nothing till review time in 4-6 months… the last drop as I told them made the credit card worthless to my purposes as I couldn’t even put a Delta ticket on that low of a limit… so told them to take their card and…

    So which other cards though have the car rental insurance and stuff that Amex does so I can switch completely away from them?

    I have been with Amex since the mid 1980′s so this is not a quick decision on my part.

  • frostysnowman

    I had the sign and travel feature on my AMEX for a couple of years, but canceled it because it ended up being more trouble than it was worth. AMEX is a charge card, not a credit card, and having part of it function more like a credit card was really not great in my opinion. I pay my bills in full, each month, and carry no balances on it or my VISA.

    The worst thing the government did with this reform was give the credit card companies a grace period to “adjust” to the changes. I spent a couple of hours on the MSN web site last week reading story after story about people whose interest rates just went up, or their cards were canceled for no reason, or their credit limits were lowered to be just above the current balance so their credit scores went down, or any number of other awful things, which were very recent changes. The card issuers are all getting in their last licks before they are not allowed to pull this kind of crap any more.

  • http://www.claws-and-paws.com/ Douglas Muth

    I make sure to pay my bill on time, in full, and never spend money I don’t have.

    Thus, APR changes never affect me.

  • http://adventuresinsearch.com Elisabeth Osmeloski

    Same here, loyal SkyMiles AMEX card holders with large available balances, got slashed by a total of over $40K in several cycles, in addition to the rate hikes, which I agree should have never been allowed by this grace period, of course they were going to hike them while they could!

    what they did on one of our cards was lower drastically to just barely above the current balance, which hadn’t yet been paid off for the month, then a few months later, when that balance was much lower, they dropped the limit drastically again. Quite frankly, I’m lucky I was floating a small balance there for a short period.

    What this credit slashing effectively does:

    1) lowers the available credit to debt ratio for customers, effectively hurting cardholders in good standing with good credit scores, since that is still a factor in computing the scores. While AMEX claims they are doing this to prevent people from getting into further credit trouble in this economy, it’s actually having a negative impact, particularly by hurting those who can actually afford to put money back into the economy (responsibly).

    2) With such high limits on our cards, we’d previously been able to put major purchases ($10-20k) & book high ticket item travel as well (some used for my small business -hopefully i can transition to a business account & get a higher limit, but I doubt it b/c the appeals ‘process’ to get our limits higher was a dead end) and then balances paid off, to earn mega-miles on Delta. Great, since we live in a Delta hub city. Now, that perk of being a SkyMiles member and Platinum AMEX holder is effectively gone.

    Delta and other Travel partners of AMEX should put some pressure on them, because I could see this potentially hurting the leisure travel market even further when consumers aren’t able to take advantage of the great deals offered by AMEX partners.

  • Nicole

    I have to questions Amex’s response that not all customers are getting the letter. I have a regular Amex card, not platinum (I refuse to pay a fee for any card) that I pay in full each month, but I got a letter with the following fee increases.
    APR for Cash Advances: Prime + 21.99% = 25.24% (currently)
    APR for Late Payment: Prime + 23.99% = 27.24% (currently)
    legalese: this rate will apply “unless a higher rate applies”.
    Late Fees: $19 if previous balance is less than $250
    $39 if greater than $250

    These rates are ridiculous. What happened to “usury” laws? It occurs to me that Amex is really trying to punish anyone who might make an occasional mistake or late payment.

  • Rocky

    AMEX dropped the limit on my Starwood AMEX from $53,000 to $1,100 overnight. This despite being a “member since 1993″ and regularly charging and paying off thousands of dollars on the card. (According to my records, about $600,000 in purchases.)

  • Jeanne

    Please forgive the following question: Is American Express about to go belly-up? Sorry – I know that sounds like a very silly question. But it seems to me with such a major restricting of credit out-flow to so many customers, and a substantial raising of their fees, that it sounds to me like they’ve got a serious cash-flow problem. Maybe I’m just not understanding what’s going on? (Probably my ignorance.) Any thoughts out there?

  • http://nodebtworldtravel.com brian from nodebtworldtravel.com

    All the credit card companies are doing this – dropping credit limits and raising interest rates on perfectly good customers who pay on time or pay off cards completely. $53K to $1K is ridiculous and an insult. I’ve had cards drop by a large percentage also. EVERYONE is deemed a risk by credit card companies nowadays.

  • Carrie Charney

    I only keep my AMEX card for quarterly or so trips to Costco. Wonder if Costco will lose business over this.

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  • Dave

    Hi! If you’ve kept your Amex for Costco, get a Costco Amex! No points, no miles, instead get cash back – 3% on gas and restaurants, 2% on travel and 1% on everything else. No fee. I don’t remember the interest rate as I never pay it.

  • ronald phillips

    It seems to me this is becoming normal for businesses to punish their existing long standing and loyal customers by these impulsive changes to business rates and expectations. I personally think that if I realize that all of a sudden a “new” customer gets a better rate or deal than me, a long time loyal customer, then I leave. Phone companies do this too. They suck new customers in with rates that I would really like to have and they should offer me if I’ve been with them awhile. Credit card companies should be the same way. My credit is stellar and yet they still dare to piss me off when these shenanigans? Well, then it’s time to find a new credit card, a new bank, and be a ‘sought after’ customer again…

    When did companies lose their way? Burying increases in their rates with bogus fees, exposing me to their screwed up business models by making me pay additional fees along side the normal price of admission, for facets of a service that used to be covered in the “price of admission”.

    Filing fees, administrative fee, service fee… Now, we have to contend with credit card companies who have grown fat from years of american consumer gluttony and now can’t afford to eat and gorge themselves on the bounty that comes with the “good times”. Instead of leaning up and returning to a leaner lifestyle, they are gunning down their customers with devious obstacle courses and mazes that instantly penalize wrong turns and mistakes, sloughing off the largesse to satisfy their sickening appetites…

    I’m pro-business, pro-capitalism… But the banking and service industry have become insatiable pigs and threaten to suck the life out of what used to be a normal symbiotic relationship between merchant and customer. Now merchants treat me like I’m a dependant, penalizing me for asking them to perform a service.

    If a credit card company or any other business is treating you like a second rate inconvenience, leave ‘em… leave ‘em twisting in the wind. And while you are at it… make sure you tell a few people. Thank you Elliot for giving the traveling consumer a voice…

  • Capt. Joe

    The AMEX card may have been the ‘traveler’s card’ once, but no longer. I spend a lot of time in the Caribbean and most stores and restaurants won’t take it. Only the businesses which cater almost exclusively to tourists (like around cruise ship docks) take AMEX in the Caribbean. Business owners I’ve spoken with tell me the card is unusable for most businesses because AMEX is too expensive for them. Among the complaints: AMEX is slow to reimburse businesses, they charge business higher fees than Visa or Master Charge, and, as with retail customers, the international exchange rates they use always handsomely err to the benefit of AMEX. My advice is if you’re going to leave home, don’t take the American Express card with you as most of the stores and restaurants you go to won’t take it. It will just be useless weight you’re carrying around.

  • Stephen – NYC

    To SirWired:
    As you know, there is a difference between “3% and 3 percentage points.” As a math major, it always bothers me when I hear or read that something increased 3%, but in reality it was increased 3 percentage points. To use the percentage rate increase even if it applies to percentage values is perfectly fine.
    Here in NYC, the city’s portion of the sales tax recently got jacked up from 4% to 4.5%. It increased half a percentage point. Or you could say that the city’s portion of the sales tax rate increased by 12.5% (0.045 – .040 = .005 & .005 / .04 = 0.125).

  • larry bradley

    Amex issues both charge cards and credit cards. I got the same notice for my Amex Hilton credit card. The Delta Sky Miles card is also a credit card, not a charge card. So Amex is misleading in their response. In any event, card companies have lost billions by being stiffed by consumers filing bankruptcy etc and there are using their better customers to make up for this. I really don’t care what the rate is since I never carry a balance. The card is merely a convience tool for paying for stuff.

  • ed

    BofA is doing the same thing…When I called them to inquire why the increase in interest rate, they told me that “everybody’s doing it”. I told them that I have a 760+ credit score, used their card exclusively for the last 20 years, spend close to $40k/year on the card and last year paid almost $500 in fees and interest (did a lot of international traveling…those exchange fees can build up fast!) I said that with the minimum plus prime they were going with would bring my interest rate to 23%! I asked if there was any negotiation…she said “no”. So I said that I will be leaving…she said “good luck, everybody’s raising their rates”. I went to my Credit Union an they offer a MC at 7.5%, fixed…and they aren’t planning to raise their rates…I asked…
    I didn’t cancel the card…that wouldn’t be smart! I have 20 years of credit history with that card…cancel the card and your credit history disappears with it!
    I still have the card…I just don’t use it. Instead I use my Shell mastercard (1% back on all purchases) and pay it off monthly…So there BofA! And I was overjoyed when the BodA board members ousted the BofA president from the board! Yay!
    Ed

  • Rich

    To all you folks that are pissed off at your UNSECURED credit card companies I have one simple suggestion. Don’t pay them. What can they do besides ruin your credit for awhile. Remember the “loan” is unsecured. After you miss a payment or two I’ll bet you see the rate come DOWN.

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