American Express Will Pay Customers to Leave

Call it an anti-promotion: In an attempt to eliminate some low-spending customers from its cardholder roster, American Express Co. has announced it is offering to pay some holders to close their accounts.

In what the company told analysts is a “small pilot program,” an undisclosed number of American Express cardholders have received mail offers that would reward them with a $300 prepaid American Express gift card for paying down their credit balances and closing their accounts.

The accounts must be settled and closed either by the end of March or of April, depending on the holder’s billing cycle, and the customers receiving the offer must accept by the end of this month, according to press reports.

Only when the accounts are fully paid down will the former cardholders receive their $300 payments. Customers who enroll in the cancellation program will also forfeit any reward points or rebates they may have built up.

American Express spokesperson Molly Faust told Forbes magazine that the customers selected for the offer maintained large balances but were not actively making purchases with the card. The company gave no information about the total balances of the customers who were being asked to close out their accounts.

Along with other consumer credit companies, American Express has been reducing the spending limits on some of its cardholders in recent months. The company reported in an SEC filing last week that charge-offs, or consumer debts it judges uncollectible, rose in January to almost 8.3% from 7% in December 2009. In the same period, payments late by 30 days or more increased to almost 5.3% from 4.9%

The company reported in January that Q4 profits declined 72% to $238 million on higher default rates by consumers.