American Express Raises Interest Rates on More Than 1 Million Customers

Bloomberg reports that American Express will be raising interest rates for some of its users for the first time in 5 years. [This will only affect those who carry a balance on their AmEx card, something we don’t usually recommend. Interest on credit cards is usually much higher than ordinary bank loans.]

Upon review, the company found that many older cardholders had APRs  considerably lower than a comparable client would receive on a new application. AmEx decided to do a rate-adjustment recently, and sent out letters to those cardholders indicating the new rate hike.

The average rate hike was around 2.5% to a minimum rate of 12.99%.

Such a move is an anomaly in the banking world, with rate-hikes usually spurred by shift in interest rates or other risk factors, something which hasn’t happened recently.

A company spokeswoman said,

Rate changes are a normal part of business…We analyzed our credit-card portfolio last year and found customers that had APRs considerably lower than market rates, sometimes as low at 3.25 percent.

The rate hike is part of the broader picture of the recent blows that American Express took with their loss of partners Costco and JetBlue, and with the recent anti-trust ruling which won’t allow them to discourage use of lower-fee cards, as the company looks for sources of additional revenue. Specifically, the Costco loss hit them hard on the interest-rate end, as Costco cardholders accounted for 20% of all loans from AmEx credit cards.

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