American Express ending pro-rata fee refunds in the USA from September – UK to follow?

American Express is having a bad time of things at the moment.  The loss of the Costco contract in the US was a hammer blow to the business (I thoroughly recommend reading the story here) and there has been a drip of other contract losses.  The potential loss of the Starwood Preferred Guest card – which is a big deal in the US – also hangs over it, as Marriott has a long established deal with Visa.

I occasionally get emails from people asking why American Express does pro-rata fee refunds on its cards when you cancel.  The answer, from a friend who worked in card operations in London for a major US bank, is that it is because Amex does this in the US and it needs to standardise policies for accounting reasons.

Amex American Express

American Express is now changing the rules in the US with the following message appearing on statements:

Closing your Account Effective September 1, 2016, in Part 2 of the Cardmember Agreement, we are amending the Closing your Account sub-section in the Other important information section by inserting a new paragraph after the first sentence: If an Annual Membership fee applies, we will refund this fee if you notify us that you are voluntarily closing your Account within 30 days of the Closing Date of the billing statement on which that fee appears. For cancellations after this 30 day period, the Annual Membership fee is non-refundable. If an Annual Membership fee applies to your Account, it is shown on page 1 and page 2 of Part 1 of the Cardmember Agreement. 

You can see why it would do this.  Let’s imagine that Amex earns, in the UK, £25m per year from annual fees.  At any point in time, 50% of that revenue is at risk of being refunded and so it cannot be treated as income.

Switching, overnight, to a system which did not allow refunds would immediately add £12.5m of profit.  I have no idea what the US number would be but it would be many times larger.  It is a tempting target for a CEO who is now under threat of takeover and who is desperate to make his numbers look good.

There is no certainty that the same rules will apply here.  However, if the only reason it didn’t already happen here is that Amex wanted its global accounting policies to match, it may well be on the way.

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  1. If it happens, then there is no more reason to try and spend 15k on the Gold charge and keep it for an extra month to get 10k MR (previously 7.5k)

    This reminds me I need to refer my wife and cancel mine :p

    • Not really the case IMV. Amex pay you the 10K bonus very promptly and as per the story above, you get 30 days to request a refund of the fee etc

      I think you’ll often have plenty of time to bank the bonus and then cancel the card for a refund.

  2. Eliminating pro-rata refunds won’t make any difference to their current earnings – membership fees will still have to be classified as unearned revenue under US GAAP since the costs associated with those revenues have not been incurred. That said, it will probably make last year’s deferred revenues look a little better…

    • Genghis says:

      I was just going to say – accounting is unaffected but cash flow is a bit more certain.

  3. Danksy says:

    I can see this is a risk, but not for the accounting reasons that you cite !

    Income recognition has books written on it, they AMEX would not be allowed to recognise future income from their card base – it’s not allowable!

    However investors maytake their own punt on what the income could be and may use numbers of cardholders to make their own assumptions; thus if they take a pessimistic view currently (due to refunds) that they think may improve it may create a favourable blip in stock prices.

    The real opportunity is to either drive spend per card or to reduce the costs per card. I’d suggest cutting benefits (costs) to around the same level or lower than the price they charge of the benefits ..or conversely raising overall income is a more likely scenario (removing cancellation fees raises income per card).

  4. With all these challenges faced by Amex I’m hoping they’ll end their life long blacklisting. Due to an incursion with them in my student days they still decline my applications but now I’m a reformed character!

    • Neil

      I’m not sure this is true. When I was i my early 20s I proudly got an Amex Platinum Chargecard. Overspent a couple of months and had the card ‘removed’ for frivolous spending!

      Fifteen years later I’ve now got 2 AMEX cards and am a bit better at paying on time 😉
      Not sure about this life long blacklisting you talk of. Do you know it for fact?

      • If he’s still getting declined, then it seems like a fact.

        Did they really call your spending ‘frivolous’ or did you just not pay the bill?

        I also got an Amex in my early 20s and spent way more than my declared income… but it was all MS so had no problems paying :)

      • Danksy says:

        I ended up with a recurrent card charge that ‘hit’ after I closed my account and moved home.. A £45 charge ended up costing me nearly £600 as they couldn’t bill me (since I’d moved).

        They sold my debt on and I settled it in full eventually. This was 10 years ago and since then I must have had 10 cards!

  5. Amex standardising policies across markets doesn’t seem to happen. Amex has gone to 1 lifetime signup bonus per card in the USA, but haven’t at least as yet, seen it necessary to do similarly in the uk.

    • USA bonuses are often substantially higher than the UK though. I have often seen over 100k miles or points on offer whereas we make do with a quarter or a third of that at best.

  6. Andrew (@andrewseftel) says:

    Would someone like to give me an accountancy lesson and explain why Amex can’t just take the fee revenue and provision against refunds based on a fair estimate of incidence? I would have thought you’d then be able to recognise the majority of the fee on the P&L on day 1.

    • Genghis says:

      I’m more knowledgeable of IFRS than US GAAP (which Amex reports under) but it is all to do with the matching concept – i.e. matching revenue with expenses. The payment of £195 for a BAPP does not in itself relate to the transfer of a specific service to the customer. It is the ongoing use of the BAPP that the customer has ‘bought’ such that revenue is recognised over the life of the contract (12 months), thus matching any expenses associated with the card (e.g. any insurance benefit etc).

    • Danksy says:

      The cash is recognised as day one (it’s an asset)
      Income hasn’t been earned (since it spans a future period of time)

      • Genghis says:

        Indeed. Initially debit cash, credit deferred income then over the year (most likely on straight line basis) unwind the deferred income (debit deferred income, credit revenue)

  7. OK so where do I get one of those cool vintage Amex cards from?

  8. I’m not sure I but the standardisation argument – if so then can we please have fee-free forex fees as they have there? :)

    Also the revised T&Cs sound like you have 30 days from when the fee posts to cancel and get a refund, so hit that spend target very quickly and you could still be OK (unless they change the rules for when bonus points post too)

  9. David Butcher says:

    Any thoughts on the UK Costco relationship? Is that likely to end the same way?

  10. It is cyclical. Well, the card thing is clearly not cyclical because the law has changed. Hiwever, as soon as a recession turns up BA will be back offering 100% transfer bonuses on Clubcard conversions (to get some cash in the door) and offering 50% discounts on Avios redemptions in order to book some deferred revenue.

    Be clear. There has NEVER been a better time to fly well for peanuts. About 12 years ago I went to Japan on a BA ticket booked ex- Budapest which cost £1750, probably £2500 today with inflation. That was an astounding deal at the time. Today, Qatar will sell you a similar flight, on a better plane, for £800 in a sale.

    Etihad, Emirates, Qatar etc are offering in-flight products which knock the socks off what went before. Even with Avios, 5 years ago you could not redeem on Qatar, or airberlin, or SriLankan.

    I got Anika a one way from New York on airberlin for £3 of tax a couple of weeks ago. Iberia to New York in Business is just 34,000 Avios each way off peak plus nominal taxes. The deals are still there.

  11. “Switching, overnight, to a system which did not allow refunds would immediately add £12.5m of profit”

    …………minus the income from all the people who no longer take out Amex cards due to the policy change.

  12. Hi All,

    Have about 50k Amex MR points and thinking of transferring them to BA/Iberia.

    Any ideas on whether there’ll be a bonus transfer offer this year or are those offers long gone?

  13. Hi, Quick question. A few weeks ago after getting my Gold Amex I saw an offer for upgrading to the Platinum card from Gold to earn 20,000 points for an additional £1,000 spend. Now that I have hit my Gold target I went back to look for it and can’t see it. Does anybody know if it is still available or if I have missed it?


      However … a HFP reader who was NOT targetted for this was refused the bonus very recently, so you do this at your own risk. This is why I have not written an article on it.

      • Jonathan says:

        Good luck getting the link to work – I’ve tried numerous times and just get ERROR in red on the application page regardless of when or where i try and apply from. After about a month or so of this happening i phoned up and the agent on the phone took a while conferring but eventually said i could upgrade over the phone (if i had a spare 20 minutes) but honored the upgrade points. They did say they wouldn’t automatically post but they would diarise my account and manually post them once i spent the £1k.

      • Thanks, I will give it a go but if it doesn’t work call them and see if I can get it honoured.

        • Pojapoja says:

          Just a quick follow up question to this: I’ve already renewed my Gold card and have incurred the membership fee, so I was planning on transferring my 100K MR points or so out of my account (probably 50/50 into Avios / SPG, although this is a different question!)

          With this offer, I’m tempted to upgrade and for another month to get the 20K bonus, but I’m unsure if I would be reimbursed pro-rata (renewed 4 months ago) for the £140 Amex Gold membership fee prior to paying the £450. Does anyone know if this would happen?

          On a separate note, would I be able to cancel the Platinum card and also get the pro-rata reimbursement? I would literally only use this until triggering the 20k bonus…


          • Pojapoja says:

            Doh! Just read the exact same question below. Ignore this…brain still in weekend mode!

  14. Isn’t this also about retention figures? A bright spark measurably reducing churn with this wheeze could win a brownie point or two. If the anticipated drop in new sales can be outweighed by the refund savings, further spend on retained cards and perhaps some promotional scheme to further new sales, then lots of warm and fuzzy per customer numbers move north.

    • Amex used to set management targets based on new sign-ups. That is why the churn rules are lax! “What gets measured gets gone” and stuff the rest, which is how the whole business world operates.

  15. rams1981 says:

    Kind of OT but AMEX related – I’ve been offered 20,000 points to upgrade my gold rewards to platinum if I spend £1000 in 3 months.
    1) worth doing?
    2) I’ve already paid for this year’s gold rewards fee of £125 – is that refunded?
    3) how long will points take to post following the spend? Assume best to cancel quickly in case they revoke that as per the article!

    • 1) Its easy points if you have spend coming up anyways. In the meanwhile you can upgrade your status levels at hotel partners & use Priority Pass if you got trips coming up. The Platinum charge fee will hit on your first statement.
      2) Gold fee is refunded pro-rata
      3) Bonus points post day after you hit 1K

      • Only snag – if you downgrade to Gold later you start paying the fee from Day 1.

        • rams1981 says:

          Thanks Relaxo.

          Rob I’m thinking of fully canceling and recycling gold one last time in case the changes your article point can happen do pass…

    • Actually – if you upgrade from gold to platinum, your platinum fee doesn’t hit until your GOLD anniversary date 😉 2 out of 2 times so far. 😉

      • You were very lucky! – When I did this last year I was charged after the 1st full month of having the card.

  16. george says:


  17. I would’ve taken out the same Amex cards even with no refunds – still a good deal and excellent customer service.

  18. Excellent article, Rob. Thanks

  19. Nathan says:

    O/T slightly but I have reached my bonus on my Gold card but was going to keep it for a while before churning as my wife just got hers anyway and I’m a supplementary card holder. Mainly keeping it as waiting to see where I want to transfer my MR points. How likley is a bonus offer to spring up in the next few months to Avios/BAEC/etc?

  20. rams1981 says:

    OT went through my supercard activity now it has closed. Spent nearly £80k on it including numerous cash withdrawals! Wasn’t there supposed to be a limit?

    • Did you manage to direct that to a 2 point Amex card?

      • rams1981 says:

        No. Only my IHG and Hilton cards and then curve before it withdrew Amex.

    • I found the limit was never imposed. Only ever managed 1 point visa until the last 6 weeks of linking curve. Quite lucrative with 2 curve cards – definitely got my moneys worth!

    • There were in the T&Cs but they didn’t seem to always apply them (at least the fees weren’t) – was lovely paying off some mortgage with bmi Mastercard!

    • Mr Dee says:

      Its a sad day I spent a large amount on the supercard, there was a limit of £5,000 per day, 15 transactions per day and the cash withdrawal limit of £500 per da, I believe the rest were not imposed.

      Linking curve was good but as curve was extremely unreliable chasing two third parties for a refund of a declined transaction became a lot of hassle

    • Do we know when Supercard is relaunching?

  21. Hi guys,

    Would be very grateful if someone could make a suggestion as to which airline might work best to redeem Avios to fly to New York from Edinburgh, spending the least amount of money, and how to. I.e If the booking need to be with say Iberia, how do I redeem Avios with Iberia? I have about 60k Avios which might get me there. From Edinburgh there are cheap flights to Scandanavia, but less so, say Madrid.

    Thanks very much,

  22. smellyden says:

    Would it be best to apply for the Platinum card now with a view to cancel it in a couple of months once I have hit the spending target? Also do the membership points get saved with Amex, or do I have to send them to avios or others?


  23. I have long-standing BA Amex, which I haven’t used for ages, but have been keeping for the mythical future day when my financial situation stabilises and I’ll be able to contemplate the taxes on a transatlantic flight (plus hotels etc.) to make use of the 2-for-1 voucher.

    My fear has been that if I cancel now, then reapply as and when we’re on an even keel, the current benefits won’t we available to new customers.

    What’s the general view in the crystal ball on this one? I’m sorely tempted to cancel and take a pro-rated refund of the annual fee (whilst I still can) and hope that I can re-apply and still get a 2-for-1 voucher.

    • As you talk about a fee, I’m assuming you’re talking about the BA Premium Plus AMEX. New applicants will pay £195 for the card now, and as far as I am aware all existing holders of this card will be subject to the increased fee (from £150) on renewal. If you cancel the card you will loose the 2-for-1 (Companion) voucher, but you could downgrade to the BA AMEX (the blue one) to keep the Comp voucher.

      • Yes, I meant the Premium Plus card.

        My query was, is the card likely to be downgraded in the near future – and if it is, would that be for new applicants only, but protected for existing card holders?

        ie Better to stay with it for the long term?