How to prevent being shut down by American Express

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The blogosphere is full of news about American Express shutting down customer accounts. Quite expectedly, this has resulted in some level of panic and rightly so. However, what’s the signal to noise ratio here? I think it’s vital to take an analytical approach before drawing conclusions about what Amex is up to here. If you’re still sailing smoothly, how do you prevent getting shut down my Amex?

Real Data Points

While these shutdown reports often create a panic, there’s still a dearth of credible reports about these shutdowns. Also, even if the reports are credible, is there a critical mass that warrants us all to take a closer look at what’s happening?

Developing a Framework

There’s no dearth of information about reports of these shutdowns. However, I was hoping to come up with a framework that would help readers figure out what’s happening. Should all of us be worried? If not, what should be the level of concern?

At a very basic level, I tried to break these down into two different buckets. One is the type of action you take. The second bucket is Amex’s reaction to it. Quite often the level of panic is dictated by the severity of action that Amex takes. Do they simply claw back points or shut down your account altogether?

Types of Actions

If you look at some of the discussions happening on reddit, there are certain types of actions that evoke a reaction by Amex. If Amex doesn’t like what you’re doing, they’ll probably do one of three things:

Denials: They will deny you when you apply for a credit card or simply deny you the sign-up bonus after you’re approved for the card, if they suspect that you’re gaming the system.

Clawbacks: This means that Amex is taking a much more than cursory glance at what you’re doing. For example, Amex temporarily froze accounts of customers who had applied for the 100k Amex Platinum offer that wasn’t quite meant for them. Most recently, we’ve seen Amex claw back points from customers who’ve done a lot of self-referrals. On Reddit, some people have reported that Amex has in some cases clawed back up to 100,000 Membership Rewards points for self referring.

Shutdowns: This is the red line. It means that Amex has had enough and that they don’t think you’re worthy of keeping as a customer. A reddit user posted a screenshot of how your Amex account looks once the dreaded message appears on your screen. What’s striking is that this person has types of the same card – 2 Personal Platinum Cards and 3 Business Platinum Cards.

 

Bad Actions

So which are the bad actions that may prompt Amex to take a second look at your account? If you want to prevent any undue attention, it may be prudent to stay away from doing any of these things. Again, it’s not necessary the simply one of these actions would lead to a shut down. However, a combination of one of more of these actions would definitely invite a scrutiny of the account.

• Heavy Manufactured Spending
• Applying for a sign-up bonus that wasn’t meant for you
• Multiple Self-referrals
• Selling points
• Multiple pay over times
• Credit Cycling
• Late Payments
• Exceeding Credit Limit
• Constant Churning

Crunching the Data

There’s a handy spreadsheet of data points being circulated by Reddit users. These apparently contain reports of users who were shut down by Amex in November. In spite of all you’re reading off late, I still think there’s no reason to panic. Quite often, the cases that shut down get a lot more attention. Also, we don’t always know which other adverse actions those users took (beyond the ones reported on Reddit) that invited a shutdown of their accounts.

The spreadsheet has a total of 154 responses. Out of these, 65 responses are either unverified or marked as fake/duplicate data points. That brings the total of credible responses down to 89 responses, which is only 57.79% of the original data set. Out of that data set, only 10 users have reported being shut down. So, in essence, only 11.23% of the credible 89 users who responded got shut down.

Observations & Conclusions

Beyond the mere raw data in the spreadsheet, I think there are a few aspects that need to be looked at. Magnitude is vital when it comes to the measurement of these actions and what the ensuing ramifications may be. Ask yourself these questions. These may give you a better representation of where you stand when it comes to attracting Amex’s fraud prevention teams.

• What’s your ratio of organic spend to manufactured spend?
• Do you have a steady predictable spending pattern?
• What’s your length of association with American Express? Is your first American Express card still open?
• Have you held an Amex card for many years on which you’ve been paying the annual fee year after year?
• Is your spend exponentially high at any single merchant? (For example, Gift card mall)
• Are you constantly churning Amex cards? (Signing up, getting the bonus and then canceling)

The Pundit’s Mantra

I’ve written previously about avoiding the crash and burn approach and why it’s bad. Miles and points aren’t going anywhere. The risks you take to earn those extra miles are never worth risking a shut down by a major card issuer. From the data above it seems like if you’ve done multiple self-referrals, hold multiple of the same credit cards and do heavy manufactured spending in bonus categories, you may well be on Amex’s radar already.

While I think that Amex’s surely cracking down and is no mood to play games, I also feel that there isn’t much reason to panic about it. The primary reason I see is the fact that we only have 10 credible reports of customers shut down. As bad as that may sound, it’s still really small chunk of customers of Amex customers whose accounts have been closed. I hope the data, behavior patterns and details were of help to you in getting a feel of where you stand when it comes to attracting undue attention from American Express.

What do you think about the data? Do you think that Amex’s cracking down a lot more than what the data suggests? Let us know in the comments section.

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