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? – January 2021 update
If you are looking to apply for a new credit or charge card, here are our January 2021 recommendations based on the current sign-up bonus.
British Airways American Express
5,000 Avios for signing up, no annual fee and a companion voucher for spending £20,000 Read our full review
British Airways American Express Premium Plus
25,000 Avios and the UK’s most valuable credit card perk – the 2-4-1 companion voucher Read our full review
American Express Preferred Rewards Gold
Your best beginner’s card – 20,000 points, FREE for a year & two airport lounge passes Read our full review
The Platinum Card from American Express
30,000 points and an unbeatable set of travel benefits – for a fee Read our full review
Virgin Atlantic Reward+ Mastercard
15,000 points bonus and the most generous non-Amex for day to day spending Read our full review
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:
American Express Business Gold
20,000 points sign-up bonus and free for a year Read our full review
American Express Business Platinum
40,000 points sign-up bonus and a long list of travel benefits Read our full review
British Airways Accelerating Business American Express
Earn both Avios and BA On Business points with your business spending Read our full review
Capital On Tap Business Rewards Visa
The most generous Avios Visa or Mastercard for a limited company Read our full review
Disclaimer: Head for Points is a journalistic website. Nothing here should be construed as financial advice, and it is your own responsibility to ensure that any product is right for your circumstances. Recommendations are based primarily on the ability to earn miles and points and do not consider interest rates, service levels or any impact on your credit history. By recommending credit cards on this site, I am – technically – acting as a credit broker. Robert Burgess, trading as Head for Points, is regulated and authorised by the Financial Conduct Authority to act as a credit broker.