AMEX To Raise Late Fee and Rates on My Cards

I usually don’t pay too much attention to mails credit card companies send to me because, being very careful with my credit, I have largely stayed out of trouble with credit card companies. Most of the time, I don’t even read those letters that come with account policy or agreement changes. They just don’t concern me since I always pay every bill in full on time.

Then last week, I received two letters containing price change from American Express for two cards I own: Costco TrueEarnings Card and Optima Platinum Card. Citing changes in the business and economic environment, AMEX says in the letters that it found it’s necessary to increase rates and fess on some of its products. Particularly beginning the bill cycle on October 1, 2009, it will raise APRs on purchases and cash advances and increase the late fee. Even though I don’t think these changes will affect how I use the cards (I never withdrew any cash using a credit card and was never late in making a payment), I decided to go through the letters carefully this time to see what will be changed, given how much talk there is on how credit card issuers are making changes on their policies when they still can.

Starting October 1, 2009, AMEX will change the standard APR for purchases to the Prime Rate plus 11.99%, which is 15.24% as of August 1. The APR for cash advances is increased to the Prime Rate plus 21.99%. Currently the APR for purchases on my cards is at 13.24%. The 2% increase actually isn’t too bad. However since I didn’t have any financial charge against me before, I thought I should be rewarded with a lowered APR for being a good customer, not a higher APR. As for the late fee, AMEX has decided to adopt fee structure that depends on the amount of balance instead of a flat fee. If the balance is below $250, the late fee will be $19; otherwise, the fee will be $39.

It’s no all bad news though. In the letter, AMEX also says it will eliminate the over-the-limit fee at the same time when the above price changes take effect.

At the end, AMEX didn’t forget to remind me that it’s important to keep my balance under my credit limit and pay my bill s on time to avoid late fee.

Well, we all know they are the obvious when handling credit cards.  That’s what I have been doing for years and it’s why I don’t really care these price changes :)

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6 Responses to “AMEX To Raise Late Fee and Rates on My Cards”

  1. Jim |  Aug 20, 2009 at 3:08 pm

    My wife and I got the same letters from Amex. We pay our balances every month and have good credit scores.

  2. miles anderson |  Aug 21, 2009 at 6:50 pm

    I got the same letter on about the same date. A notice of intent to raise APR. So I called to say, fine, close my account, I’ll pay off at the existing rate. Guess what? The very apologetic Customer Service lady said no, actually you can close your account, but we’re still going to raise your rate. When I expressed shocked disbelief, she said, “Well, the law changes today so we had to do it.”

    In other words, “Before they make what we intend to do illegal, we’re going to screw as many of our customers as we can.” I pointed out that what they were doing was unique in my experience — i.e., I’ve had other cards notify me of their intention to raise interest rates, but never had one behave so dishonorably as to unilaterally raise my rates despite closing my account. “Yeah, I’m really sorry, ” the nice lady said.

    She sounded genuinely ashamed to be party to what the company was doing. I can’t blame her. It’s like working for one of those telephone operations where they sell fake burial plots or cancer insurance to fleece old people out of their savings.

    It is disgusting to think that the law, until now, allowed a company to do as Amex is doing in this case. Amex, despite its carefully groomed image, has decided instead to throw in with the bottom feeders: the loan sharks, war profiteers, companies that sell spoiled food to Third World countries, all with the excuse, “Well, it’s legal.”

    I’m writing to my congressman, both senators, every Amex celebrity spokesman and sending off press releases (talk is admittedly cheap, but at some point one of the press releases will get picked up). And of course closing my account, which I’ve had since 1995. Never made an easier decision in my life.

    They’re slime.

  3. kitty |  Aug 22, 2009 at 4:50 pm

    I got the same letter, but since I am paying in full, I couldn’t care less. It has nothing to do with how good or bad a customer you are, but with increased costs of doing business – both in terms of new regulations and increased rate of defaults. The rate of defaults is over 10% now if I am not mistaken. With this rate of defaults and with new regulations that would hurt their ability to charge more to their riskier customers, they just raise rates on everyone to compensate. Think about it as a business selling a product when the cost of doing business just went up. What happens then? Prices go up.

    Miles — the way you talk is like you are entitled to cheap credit. You are NOT. This is a business, and as any business they have a right to raise prices on their product. They are responsible to their shareholders – and they include every one who has index funds too. They also have employees and they have to pay salaries. It’s certainly better for economy that they raised rates then that they fire more people and increase unemployment. Also, if you are closing the account, then you are sending them the check for the full amount you owe, right? So why do you care what the rate would go up after that? I don’t understand you. Not to mention that when you agreed to use their card and decided to carry balance you agreed to their terms that included the one that they can raise the rates at any time. First you sign a contract, then you say you aren’t happy about rules? Too bad.

    Do a little math. Imagine you lend $1000 of your own money to 10 people you don’t know and without any collateral, $100 each. Imagine one of them defaults i.e. doesn’t return you the money. Here is an elementary school problem for you. How much interest do you need to charge the remaining 9 customers to get your $100 back i.e. to just break even, no profit? Now calculate for some reasonable profit so that you can pay your employees, pay the rent and keep your shareholders happy. 15.9% doesn’t sound that high now, does it? BTW – 10% is around the current default rate.

  4. J H |  Sep 17, 2010 at 9:15 am

    Do you know what?
    I made 1 day late payment due to mail delay (Actually I sent it to NJ from MD, 5 days before the due date, but they said I’m late),
    they chareged late fee of $39 plus interst chage.OK
    But the horrible thing is they charged 2 MORE MONTHS of interst charge for punishment of being late.
    They said it is on the agreement, but anybody read that part?
    We’d better be very careful with Credit Card Companies and send payment very early before the due date.