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American Express Just Can't Quit You

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American Express (NYSE: AXP  ) can't seem to quit you.

Yes, you. The one who just got offered a $300 debit card in exchange for paying off your balance and canceling your account. Or maybe you aren't one of the lucky (unlucky?) ones. Either way, AmEx has decided that some of us must be gone by April 30.

Why not raise interest rates and late fees instead, you ask? Apparently, that's for lightweights like Capital One (NYSE: COF  ) and JPMorgan Chase (NYSE: JPM  ) .

For its part, an AmEx spokesperson told The Wall Street Journal that the (ahem) program is targeted at "cardmembers who have sizeable balances and little spending and payment activity." Translation:

  1. They aren't generating fees.
  2. They might be at risk for default.

AmEx won't say that, of course. A spokesperson instead told the Journal that the company's intent is to "help cardholders lower their debt and encourage responsible management of their credit."

Balderdash. If American Express were really interested in helping consumers responsibly manage credit, this wouldn't be a two-month crash program. But that's what it is: Pay off your balance in a month, lose your account, get 300 bucks. As a bonus, they may even throw in a lower credit score, because your rating could take a hit as soon as your account closes.

Let's at least be honest about what this is: the corporate equivalent of a junkie trying to get clean. There's no gradual step. You just throw away the cigarettes, empty the liquor cabinet, and dump the high-risk borrowers.

That's what you do when credit-card default rates start heading the way of mortgage default rates. That's how you avoid becoming the next Citigroup (NYSE: C  ) . Or the next Bank of America (NYSE: BAC  ) . Or the next ... Well, you get the picture.

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American Express is an Inside Value pick. JPMorgan Chase is a Income Investor recommendation. Try either of these Foolish services free for 30 days. There's no obligation to subscribe.

Fool contributor Tim Beyers didn't own shares in any of the companies mentioned in this article at the time of publication. The Fool owns shares of American Express. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy won't quit you. Ever.

Read/Post Comments (3) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 24, 2009, at 7:07 PM, bud357mag wrote:

    You got that right friend,but I will keep my card antway thank you very much.Pay up every month and take the goodies :))

  • Report this Comment On February 25, 2009, at 2:35 PM, AnnamarieK wrote:

    I was a AX cardholder since 1983 with Green and a Gold card. Feb. 10th they cancelled my accounts without notification. In approximately 30 years I may have been late on 3 occasions due to vacation.

    I pay it off evey month as stated. No reason - just cancelled. I am sure the $300 does not apply to me or anyone else they did this to.

    I have good credit- one negetive (investment home), not only have I been a good cardmember, it will hit my credit score as well. When will banking institutions be stopped? Hitting solid Americans again, they should be ashamed of themselves.

  • Report this Comment On March 19, 2009, at 6:39 AM, rmiers wrote:

    As a thirty five year licensed Texas Real Estate Broker I was both amused and bewildered that a purchaser could buy a 200,000 home and yet not qualify for a 5000 automobile. They even stacked the downpayment and closing costs(6%+5K) into the loan.

    I also watched the savings and loan fiasco of the mid eighties and knew before hand the open dishonesty.

    None of this could have happened without government's blessing.

    I now watch the gaming of the stock market. Repeal of Glass/Stegall, market to market and worst of all the uptik rule and the ability to "naked short" which simply is the ability to sell stock your don't own and not even pay for your losses if things go wrong.

    America had better pay attention or there will not be the country as we know it. Class warefare has already started.America's wealth has not vanished, it is sitting on the sidelines in other unknown peoples accounts. They estimate it to be 9 trillion dollars....just about the money the economy is short, The robber barons are back America.

    Let the bankers cancel the credit cards, they are not needed if one lives frugally. Watch the banks eat it for they will cut off their noses and their most profitable source of income,

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