American Express ending pro-rata fee refunds in the USA from September – UK to follow?
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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.
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.
Want to earn more points from credit cards? – September 2024 update
If you are looking to apply for a new credit card, here are our top recommendations based on the current sign-up bonuses.
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You qualify for the bonus on these cards even if you have a British Airways American Express card:
Barclaycard Avios Plus Mastercard
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Barclaycard Avios Mastercard
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You can see our full directory of all UK cards which earn airline or hotel points here. Here are the best of the other deals currently available.
American Express Preferred Rewards Gold
Your best beginner’s card – 20,000 points, FREE for a year & four airport lounge passes Read our full review
British Airways American Express Premium Plus
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The Platinum Card from American Express
40,000 bonus points and great travel benefits – for a large fee Read our full review
Virgin Atlantic Reward+ Mastercard
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Earning miles and points from small business cards
If you are a sole trader or run a small company, you may also want to check out these offers:
SPECIAL OFFER: Until 22nd October 2024, the bonus on American Express Business Platinum is increased to up to 80,000 Membership Rewards points, worth 80,000 Avios. You will receive 8 points per £1 spent for the first three months, on up to £10,000 of spending. Click here to read our full card review. Click here to apply.
SPECIAL OFFER: Until 22nd October 2024, the bonus on American Express Business Gold is increased to up to 40,000 Membership Rewards points, worth 40,000 Avios. You will receive 4 points per £1 spent for the first three months, on up to £10,000 of spending. The card is FREE for your first year. Click here to read our full card review. Click here to apply.
American Express Business Platinum
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American Express Business Gold
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Capital on Tap Business Rewards Visa
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British Airways American Express Accelerating Business
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For a non-American Express option, we also recommend the Barclaycard Select Cashback card for sole traders and small businesses. It is FREE and you receive 1% cashback on your spending.
Barclaycard Select Cashback Business Credit Card
1% cashback uncapped* on all your business spending (T&C apply) Read our full review
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