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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.


Want to earn more points from credit cards? – January 2021 update

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You can see our full directory of all UK cards which earn airline or hotel points here.

British Airways American Express card

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BA Premium Plus American Express card BAPP

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Nectar American Express

American Express Preferred Rewards Gold

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American Express Platinum card Amex

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Virgin Rewards Plus credit card

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American Express Business Gold card

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Amex Platinum Business American Express

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 card

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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.

Comments (63)

  • David Butcher says:

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

    • Rob says:

      Someone told me it was ending but I haven’t been copied in on any official notification.

  • Rob says:

    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.

  • Mark says:

    “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.

  • JP says:

    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?

    • Rob says:

      Long gone …. until the next recession when BA is desperate for a few quid from Amex.

  • Rob says:

    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?

    • Rob says:

      https://www.americanexpress.com/uk/content/upgrade-to-platinum/index.html

      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.

      • Rob says:

        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…

          Thanks!

          • Pojapoja says:

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

  • RW says:

    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.

    • Rob says:

      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.

  • 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!

    • Relaxo says:

      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

      • Rob says:

        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…

    • RTS says:

      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. 😉

      • Simmo says:

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

  • george says:

    anyone?