Does Your Credit Card Issuer Want A Divorce?

Here’s something new: The Wall Street Journal (WSJ) published an article in yesterday’s edition titled, “AmEx Encourages Cardholders to Leave,” where they reported that American Express was offering select customers an incentive to pay off their balances and cancel their accounts. That incentive is in the form of a $300 AmEx prepaid gift card, usable wherever American Express cards are accepted.

America’s Mailboxes Catch A Break

The move by American Express is a surprising one, especially considering that as recently as a year earlier all of the major credit card networks were sending out offers right and left. That practice, which had been going on for many years, seems to have passed. Today, credit car providers are cutting credit lines, canceling accounts and, in the case of AmEx, offering an amicable divorce.

In the WSJ article, written by Mary Pilon, she noted that the card issuers are seeing a spike in defaults as the recession deepens. Worried that they might be over run with bad debt, issuers are taking unusual steps to make sure that higher risk customers are shown the door. For the record, American Express isn’t saying much about who is receiving their offer letters.

Customers who receive a letter have until February 28th to decide whether they’ll accept American Express’ offer or not. If they do, they’ll use a special RSVP code that when submitted online cancels their membership on the spot. They then have from March 1st to April 30th to pay off their balances and receive their prepaid card.

Closing An Account Has Its Drawbacks

If you receive such a notice from AmEx and are considering closing your account, there are a few things to keep in mind:

• If you don’t use your membership reward points before closing your account, then you’ll lose them. Use up your points now, agree to the offer once they have been redeemed.

• Your credit score will take a hit.  The way your credit score is calculated, closing an account even with an enticing offer dangled before your eyes from American Express, can lower your credit score at least temporarily. This means that if you plan on applying for additional credit later on, your terms could be less favorable. Who knows, but you may end up paying far more than $300 in interest for a mortgage, wiping out the worth of the AmEx prepaid card.

Be On The Look Out

If you don’t have an American Express card, your credit card issuer could offer to you a similar incentive to leave.  Regardless, all consumers need to be watchful for fee increases and higher interest rates, as issuers attempt to maintain profits in a down economy.

Adv. — Have you checked your credit report lately? How about your FICO score? As a consumer, you need to be on top of your credit history, checking for errors and making certain that the information in your consumer credit reports is accurate. Employers, banks, mortgage companies and other lenders base your credibility on a three digit score. Avoid surprises — check your credit report today!

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