Another sign of the credit crunch.
It used to be that credit-card companies lured customers with cash rewards. Now American Express Co. is paying to get rid of them. The card issuer is offering selected customers a $300 AmEx prepaid gift card if they pay off their balances and close their accounts.I understand what AMex is doing but will it really work. If what the spokesman says is true, the cardmember isn't likely to have money to pay off the balance. In addition finding another credit card issuer to transfer their balance to, is probably a harder task to accomplish right now than safely juggling three ginsu knives without cutting yourself or me going through a whole day of posting at Wizbang without annoying at least one commenter.The unusual move underscores how quickly conditions have deteriorated in the credit-card market. The current economic morass was provoked by spiking mortgage defaults. But as the economic crisis widens and unemployment climbs, there is growing concern that credit-card defaults will soar into the stratosphere as well.
"This is a huge paradigm shift," says Curtis Arnold, founder of CardRatings.com, a credit-card review Web site. He says he expects other large companies to follow suit with offers to entice consumers to pay off their balances, as card issuers cope with increasing defaults.
Selected members -- the company wouldn't disclose how many -- began receiving letters with the voluntary offer earlier this month, according to Molly Faust, an American Express spokeswoman. "It's a relatively small number of cardmembers who have sizeable balances and little spending and payment activity," she says.
Permalink | Linking Blogs | Sphere: Related Content | Digg this! | FARK It!
Filed under:
Economics
Comments (6)
Cost cutting measure. But ... (Below threshold)1. Posted by John | February 25, 2009 10:49 AM | Score: 1 (1 votes cast)
Cost cutting measure. But honestly, maybe they should stop sending out those gold and platinum credit offers out to save some money. I am tired of ripping those up.
1. Posted by John | February 25, 2009 10:49 AM |
Score: 1 (1 votes cast)
Posted on February 25, 2009 10:49
2. Posted by Clay | February 25, 2009 11:48 AM | Score: 1 (1 votes cast)
American Express issues charge cards. A charge card is a specific kind of credit card. The balance on a charge card account is payable in full when the statement is received and cannot be rolled over from one billing to the next. Because you cannot carry a balance, a charge card doesn't have a periodic or annual percentage rate, so there is no rate for a charge card issuer to disclose.
2. Posted by Clay | February 25, 2009 11:48 AM |
Score: 1 (1 votes cast)
Posted on February 25, 2009 11:48
3. Posted by Ray H. | February 25, 2009 12:00 PM | Score: 0 (0 votes cast)
Clay,
Some American Express cards do allow you to carry balances over from month to month and thus carry finance charges. Specifically I know the AmEx Blue (it's the clear looking card) has this. So to your point, they offer both Charge Cards and Credit Cards.
Cheers!
3. Posted by Ray H. | February 25, 2009 12:00 PM |
Score: 0 (0 votes cast)
Posted on February 25, 2009 12:00
4. Posted by Ray H. | February 25, 2009 12:10 PM | Score: 0 (0 votes cast)
Sorry, it's the AmEx Clear that allows you to carry a balance.
4. Posted by Ray H. | February 25, 2009 12:10 PM |
Score: 0 (0 votes cast)
Posted on February 25, 2009 12:10
5. Posted by Bill Jempty | February 25, 2009 12:21 PM | Score: 0 (0 votes cast)
American Express had or has a Delta Sky miles card that carrying balances was allowed. I used to have that card, but not anymore. The gold, platinum cards you are expected to pay off every month. I got one of those, but hardly use it since my extensive traveling days are over.
5. Posted by Bill Jempty | February 25, 2009 12:21 PM |
Score: 0 (0 votes cast)
Posted on February 25, 2009 12:21
6. Posted by Cloudfish | February 26, 2009 5:25 AM | Score: 0 (0 votes cast)
It seems they're also dropping credit limits, too. I've had an AmEx Blue for several years. A couple of weeks ago they dropped my credit limit from $10,000 to $500. I've never been late (ever), always paid off charges within 2 - 3 months, have a 780 credit score, and held a steady job for 12 years. When I called them about it the only reason they gave me was I didn't use the card enough. I generally used it 2 or 3 times a year for large ticket items that I couldn't quite afford to write a check for--but could afford to pay off within several months. Perhaps I should have abused it....
6. Posted by Cloudfish | February 26, 2009 5:25 AM |
Score: 0 (0 votes cast)
Posted on February 26, 2009 05:25