The American Express Blues

A few weeks ago I was having lunch with a friend who is a very successful entrepreneur. He told me he'd been having some problems recently with American Express. They'd been denying charges and giving him all sort of grief. Our lunch turned into a support group. Because I've been having the same experiences. We shared our horror stories and I felt a bit better about it.

My friend sent me a link to this story by David Lazarus in the LA Times last week. It turns out we are not alone in getting hosed by American Express. They are doing it to all of their best customers. David starts out his story with the following observation:

What does AmEx want?

That's a question American Express cardholders are asking more and more
these days as the company turns the screws on long-standing customers
and seems determined to show as many as possible the door.

I've been a customer of American Express since 1983 and have never failed to pay a bill. Right now, between my business interests and family, I carry and pay for five American Express accounts. I'm not going to get into the monthly amounts that these accounts turn over, but I will say that they are significant.

The smallest of these accounts is an old Flatiron Partners account. We don't use that account very much anymore, but we do still use it occasionally. A month ago, we were accidentally late paying that account. And as a result American Express shut down all of my accounts without notifying me. My partners in Union Square Ventures could not use their cards, I could not use my personal card, they shut off all of the accounts I have with them even though they were not in any way related to the Flatiron account. I suspect the accounts are linked because they all funnel membership miles into one single account.

But that's just one example of the hassles of being an American Express customer these days. My wife and I are routinely denied when making charges at stores and restaurants. When we call to ask why, we are told that the charge looks "fraudulent". And then they ask us if we really are making that charge. When we assure them that we do indeed want to make that purchase, American Express authorizes it.

I understand that credit card fraud is a huge problem these days and appreciate that American Express protects its customers from the fraud. But I've noticed a 180 degree change in the company in the past year or so and I think they've simply gone too far.

Maybe American Express should offer its customers the opportunity to pay an annual fraud charge that insures that American Express will not deny any charges on our accounts. I'd be happy to do that. I realize they are taking a beating and I also feel that whatever algorithms they are using to detect fraud are often wrong at the most inconvenient times.

As for deadbeats, the credit history of a person should be the single most important data point in determining credit risk. When I called American Express to figure out what was wrong with my cards in the middle of the Flatiron situation, I was told it was their policy to shut down all accounts if there was a late payment on an account. I asked if my 26 year perfect credit with them was material to the situation and I was told it was not. I hung up on them.

I understand the business challenges facing American Express. Fraud and increasing default rates makes for a very unpleasant business situation. But as David points out in his article, they should be careful not to show their good customers the door.

During the brief time I was without all of my American Express cards, I used my Chase VISA card and the experience was not any different. A swipe is a swipe and not one of them was denied.

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