Time to Dump Your AmEx Card?
By Aleksandra Todorova
August 7, 2006
AMERICAN EXPRESS'S ANNOUNCEMENT last week that they would increase the fees on most of their Green and Gold charge cards — while reducing some popular membership rewards benefits like double points on everyday purchases — hasn't resulted in a rousing cheer from card holders.
"How do they expect to retain customers by diminishing the rewards program and raising fees?" ranted a poster on CreditBoards.com1, a popular credit-card discussion board.
The answer is simple: American Express is counting on its loyal customers, who have supposedly racked up enough membership points to discourage them from walking away, explains David Robertson, publisher of the Nilson Report2, an industry newsletter.
At the same time, maintaining a rich rewards program is costly, especially when it comes to incentives like double rewards, a system that allows shoppers to earn two points for each dollar spent at supermarkets, drug stores and gas stations. And so is the fact that its charge-card members generally pay their balances off each month, which doesn't generate nearly as much revenue off interest payments as regular revolving credit cards.
Since introducing the double points for everyday spending four years ago, American Express has seen a considerable spike in spending at its target locations, according to Robertson. Having achieved that goal, though, the company is now "clearly stopping and taking a look at profitability, and thinking about the long-term liability of that program," he says. Look to see other card issuers follow suit in the upcoming year, he warns.
Here are the major changes and how they will affect you.
Increased Fees
In a move toward simplification, American Express is reducing the number of charge cards it offers. Until now, it offered multiple versions of its Green and Gold charge cards, with variations of its rewards program attached. After the changes, it will offer only one version of the Gold and Green Rewards cards, as well as a stripped-down version of each card, with no Membership Rewards program attached to it.
The result of this merging, however, is that most card members will see their annual fees increase by as much as $35. (The exception is card members who used to have Green and Gold Preferred Rewards cards; they will see a slight decrease. More details below.)
No More Double Points on Everyday Spending
The double points for everyday spending will be substituted with a new program, the "Bonus Points Mall," which will allow card members to earn double points when they shop online at specific retailers, referred through American Express's web site. (Currently, Citibank's Thank You3 rewards program has a similar network, called Thank You Merchants, where card holders can earn anywhere from two to 40 bonus points per dollar spent on purchases.) The goal of the new program, according to AmEx spokeswoman Desiree Fish, is to increase consumer spending on online purchases, much in the way that the "everyday spending" bonus has increased the usage of credit cards for smaller-ticket items at the supermarket, drug store or gas station over the past four years.
Taking Action
Not happy with the changes? You may want to consider switching to cards that offer similar benefits at lower or no annual fees whatsoever, says Curtis Arnold, founder of CardRatings.com4, a credit-card information web site. If getting double rewards for everyday purchases is important to you — and bonus gas rebates sure seem appealing these days — consider getting a credit card with similar benefits from another bank issuer, like Citibank or Chase. You can research current card offers at CardRatings.com or CardWeb.com5, another credit-card information web site.
If, on the other hand, you want to keep your Membership Rewards points, consider another strategy: Apply for a no-fee credit card from American Express, such as its Blue card. (An added bonus: Blue card members will continue to earn double points for everyday spending.) Once both cards are enrolled in Membership Rewards, the points you've accumulated so far will not be lost if you close the original card. However, if you intend to redeem points for travel rewards, you will lose some of the points' value, as charge cards allow members to redeem points at a one-point-per-mile basis, while most no-fee credit cards require two points for each mile redeemed.
The table below outlines the most important changes to be introduced to AmEx's charge cards, taking effect Oct. 1. Note that if you have an American Express credit card, those changes will not affect you.
Card
Old Rules
New Rules
Green AmEx
Personal Card
Fee: $55
No Membership Rewards Program
(A Membership Rewards program can be added for an $40 annual fee, or a total of $95 a year.)
There will be no changes made to this card.
Green AmEx:
Rewards or Preferred Rewards
Fee: $65 or $110
Membership Rewards:
With the $65 card, you get one frequent-flier mile for each two rewards points;
With the $110 card, you get one mile per point;
Earn double points on everyday spending (purchases in stand-alone supermarkets, drug stores and gas stations);
Other benefits:
Roadside assistance kicks in if you have trouble with your car 100 or more miles away from home.
Fee: $95 for either card
Membership Rewards:
Redeem one point per frequent-flier mile with both cards (i.e. enhanced travel rewards);
You will no longer earn double points on everyday spending;
Earn double points when you shop online at specific merchants, going through the American Express web site;
Other benefits:
Roadside assistance kicks in 50 or more miles away from home.
Gold AmEx Personal Card
Fee: $75
NO Membership Rewards
(A Membership Rewards program can be added for an $40 annual fee, or a total of $115 a year)
Fee: $85
(Or $125 if adding Membership Rewards)
No other changes will be made to this card
Gold AmEx Rewards or Preferred Rewards
Fee: $90 or $130
Membership Rewards:
Earn double points for everyday purchases;
Other benefits:
Roadside assistance kicks in when 100 or more miles from home;
Free shipping and handling on online purchases.
Fee: $125 for either card
Membership Rewards:
You will no longer earn double points on everyday spending;
Earn double points when you shop online at specific merchants, going through the American Express web site;
Other benefits:
Roadside assistance is effective, even if you're in your driveway (0 miles from home);
No more free shipping and handling on online purchases;
New benefit: entertainment insurance, which covers the cost of tickets to plays, concerts or sporting events in the event you are unable to attend.
Source: American Express
Better Options
Card
Bonus Rewards
American Express Blue Cash6
Once you spend $6,500 on the card in a year, earn 5% cash back at supermarkets, drug stores and gas stations. (Earn 1% cash back if you spend up to $6,500.)
Citi Diamond Preferred Rewards7
Get five ThankYou Points for every $1 spent on purchases at supermarkets, drug stores and gas stations for the first 12 months. Get one point per $1 spent thereafter. Limit: up to 75,000 ThankYou points per calendar year.
Citi Driver's Edge Platinum Select8
Earn 6% rebates on purchases at supermarkets, drug stores and gas stations for 12 months; 3% after th…
Reply:The article is making it sound like it's the beginning of a new trend/business practice.
I still like the idea of a charge card for some reason,almost forcing us to spend less as we have to pay it right away…..
Reply:Thanks for the post! I just recently applied and received the Starwoods AmEx card which seems to have some good flexibility in miles/hotel points. I think it'll work much better for me. Membership Rewards seems to be a bit overrated.
Reply:http://{$MySite}/forums/index.php?showtopic=196034
Reply:I would say that dumping charge cards would be the best idea now that double points are gone …………
Reply:I don't think dumping the CARDS are necessary, but I just cancelled my membership rewards account because the rewards, compared to other cards, are lame. The rewards are better on Amex's other cards like Hilton and Starwood, and on other credit issuers in general.
Reply:interesting…….thanks for the post
Ever wonder how many CC Executives read sites like cb.com? LOL