Thursday, November 27, 2014

Now I know why their interest rate is so high!

American Express - one of the first credit cards I got when I arrived in the US. It was essential for me to get a credit card in order to start building my credit history. The AmEx Green card was easy to get because I was working and while it claims to have no spending limit, it was also required that you clear the balance at the end of each monthly billing cycle. Therefore their exposure was only for one month, and as I discovered, until you build up a history with them, they don't honor that 'no credit limit'.

I got my card just before I moved to California from Texas. I was going to be reimbursed for the cost of my relocation once I started work and submitted my claim, but meanwhile my new AmEx Green card took the hit. Sadly, the 4th day of my first week at work my mother passed away, I booked a flight to Dublin due to leave SFO two hours later, and headed to the airport. At the ticket desk I presented my AmEx card only to have it refused based on the amount charged in the first month of the card's life. I spoke with the AmEx agent on the ticket desk's phone and eventually was approved (full story is in my book ).

After that I had no problem with American Express as I paid off my monthly balance for years, eventually gaining Gold and then Platinum level - however the annual fee jumped,, plus they started extending the limit to pay over time for major purchases, such as travel and appliances. They also offered me a Blue card at a much lower rate, and lower annual fee, with a very healthy credit limit.

At that time I was still working on establishing my home in Texas, and recovering from an expensive two years in California (again I refer you to my book for full details) and sadly was trapped in the typical American credit card spiral.

However, the point of this blog is to explain how I discovered why AmEx has such high interest rates - because they do. I am happy to say I finally did get out from under the credit card debt and we now only use our credit cards for major purchases when we know that we can clear the balance immediately. We have a very low interest card from our Credit Union and decided that was all we needed, and we certainly didn't need to be paying annual fees to AmEx for cards we rarely used. So, last month I called and cancelled both my AmEx cards. They explained to me that as long as there was a balance on the card I would receive paper statements (I have been on electronic statements since they were available). Well, fine - I didn't have a balance on either card so that was that.. I thought.

Then I received two letters from AmEx, one for each card, confirming what they had told me on the phone, next day I received two statements, each showing a credit balance - the annual fee refund for what was left of their financial year. Then the following day I received two more letters pointing out that I had a credit balance and would therefore continue to receive statements despite the cards being closed.

I wrote to them and requested a refund check be issued. I received two letters, one for each card, confirming receipt of one letter and advising me that they would issue refund checks. A couple of weeks later I received two letters containing the checks. Finally, last week I received a statement for one of the cards, showing a zero balance on a card that had been cancelled for over a month. I am waiting for the statement on the other zero balance and I sincerely hope that will be the last communication I ever have from AmEx. I can't begin to imagine how much it cost them to generate all that mail, paper, postage, person hours - all for nothing! Why could they not just issue a check once the cards were cancelled and be done with it? Then maybe they could reduce that high annual fee and the high annual interest rate.

I looked on their web site - they now offer no less than 21 different credit cards, mostly in partnership with other businesses, some with various rewards attached, all with very high interest rates, and most with an annual fee. They even have one prepaid 'credit' card, which has no credit check required! Well, why on earth would you expect a credit check if you have to load the card before you can use it. But what most intrigued me about that prepaid card was the $1 monthly fee!