Master Card and Visa have been gouging cardholders for years, while American Express remained consumer and small business-owner friendly. Not any more. American Express raised interest rates about a year ago.
Rates were hiked by over 5 percent annually in our low interest economy.
The purported reason: Too many cardholders were walking away from their obligations. Or so American Express said.
Naturally, the company beat recent estimates with a fantastic quarter in October, 2011 by borrowing low and charging high. (What a surprise.)
Small business owners tend to carry a higher monthly balance, with carry-over. Those who continued to pay their monthly bill on time were penalized, and economic life became even more difficult. With the increase in rates, hundreds of thousands (or perhaps millions) of cardholders might never catch up to their debt.
American Express made out like a …bank… on the backs of loyal cardholders.
While American Express rates still remain substantially lower than the competition, there is no excuse for a 15 to 22 percent/plus interest rate by any credit card company – especially on customers with excellent payment records. But who is going to stop them?
American Express told cardholders: If you don’t accept the increase, you can close the card, but you must pay the remaining balance due – with heavy interest of course.
Perhaps it’s time for closer scrutiny.
Here’s what American Express said in 2010:
“We still face the challenge of high unemployment levels, depressed real estate values, and shrunken household balance sheets, but the overall economy and our company are in stronger shape than they were a year ago,” said Chairman and Chief Executive Kenneth I. Chenault. Shares were trading at $41.81.
By October, 2011, earnings had risen to over $1.00 per share, the company was worth more than $5.7 billion and their stock prices exceeded $52 at it’s October high – more than a 30% percent increase. Shareholders were celebrating. Cardholders….not so much.
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