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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.

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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Comments (63)

  • Bob says:

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

  • Neil says:

    Excellent article, Rob. Thanks

  • 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?

  • 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?

    • harry says:

      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.

    • BLT says:

      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!

    • Alan says:

      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

    • Mike says:

      Do we know when Supercard is relaunching?

  • Greg says:

    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,

    • harry says:

      Given your location, a cheap non-BA positioning flight to Dublin might work efficiently, then use https://headforpoints.com/2016/03/24/how-to-use-ita-matrix/ for the Dublin-New York bit?

    • Rob says:

      Cheapest options are airberlin from Dusseldorf or Berlin, Aer Lingus from Dublin (both under £75 tax) or Iberia out of Madrid (under £150 tax when booked at Iberia Plus).

      On an off peak day Iberia only wants 68k Avios for a business class return from Madrid!

      • Greg says:

        Thanks Raffles (and Harry). Going to try Aer Lingus, that sounds good.

        • Nick says:

          Aer Lingus new Business product is excellent. Far better than BA.

  • 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?

    Thanks

  • MIM says:

    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.

    • Edward says:

      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.

      • MIM says:

        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?