American Express is making to its Membership Rewards program. How will the changes impact credit cardholders?
American Express recently announced sweeping changes to its “Membership Rewards” program, one of the credit card industry’s most successful customer loyalty plans.
Among the changes, American Express will no longer give cardholders double reward points when they use their credit cards for “everyday spending” at supermarkets, drug stores and gas stations. Additionally, AmEx will institute a new double-points program to encourage online shopping at certain retailers, eliminate a free rewards program on some of its cards, and introduce a new insurance plan that will reimburse certain customers who miss concerts, plays or sporting events if they bought their tickets with an American Express credit card.
Cardholders will likely see the changes beginning as soon as September 2006. Some cardholders’ annual fees could increase as much as $35 to a new level of $125, while others may experience a drop in fees based on the type of credit card they carry. American Express said it will begin alerting cardholders to the changes in their August 2006 bills.
The overhaul comes as AmEx and other credit card issuers are struggling to gain a larger portion of consumers’ wallets. At the same time, the firm is also battling high costs connected to the rapidly growing and creative rewards programs.
Over the past year, American Express has been generating additional spending by establishing partnerships with banks that include Citigroup and Bank of America. Under those agreements, the banks are issuing cards branded with the American Express name and processing transactions over AmEx’s proprietary network.
Meanwhile, American Express has also been aggressively pursuing new credit cards targeting niche markets including newlyweds and urban singles.The latest changes to AmEx’s cardholder rewards programs could potentially impact consumer loyalty because they are no longer receiving the double points, but American Express is hoping a new rewards program will keep customers happy. Beginning Oct. 1, 2006, the company will eliminate double points that holders of its green, gold and platinum charge cards (which unlike credit cards must be paid off each month) receive for purchases made in grocery stores, pharmacies, and gas stations. In the future, AmEx may from time to time launch special double-points promotions for these cards, as other credit card issuers already do. Cardholders who carry some American Express credit cards (such as the Blue card and the Delta Air Lines co-branded card) will still earn double points on those purchases.
In place of the “everyday spending” feature, American Express in September will launch a new feature known as the “Bonus Point Mall,” which will award Membership Rewards members two points for each dollar spent at the online-shopping sites of more than 100 online retailers, including Target, Barnes & Noble and the Gap. To qualify for the program, cardholders must access the retailers’ websites via AmEx’s online portal.
The company is also cutting back on a free version of the rewards program it had provided to holders of its green and gold charge cards. The program, launched in 1999 as “Membership Rewards Options,” yielded one travel point for every $2 spent, making it twice as expensive to earn travel rewards versus the current program. AmEx now restricts the options program to holders of its credit cards.
As of Oct. 8, 2006, cardholders in the options program will be switched into the basic rewards program, which could boost their annual fees. For example, cardholders who have the options program on green cards may have their fees jump to $95 from $65. At the same time, some cardholders who will be losing the double everyday spending points could see their annual fee decrease by $15 to $125.
Starting Oct. 1, 2006, AmEx is also ending a feature that gave free shipping and handling that was available to holders of its high-end gold, platinum, and Centurion cards who shopped at certain retailers on the Internet. The company noted that customers were not using the feature, making it less cost effective for AmEx to offer and promote the program.
Building on its extensive marketing campaign that allows certain customers to purchase advance tickets to certain events, American Express is offering a new free insurance service that will reimburse Gold, Platinum, and Centurion cardholders if they unexpectedly miss the concert, play, or sporting event.
Summary of changes
American Express is dropping:
- As of Oct. 1, Rewards and Preferred Rewards Green, Gold, and Platinum charge-card holders will no longer be earning two points for each dollar spent at merchants including gas stations, supermarkets, and drug stores. Instead, they will earn one point for each dollar.
- Starting Oct. 8, nonfee rewards program Membership Rewards Options will no longer be offered to charge-card users. Instead, customers can pay a fee to be upgraded to the Membership Rewards program, which will see their points double in value when redeemed for travel rewards.
- From Oct. 1, free shipping and handling on some purchases made online with AmEx Gold, Platinum and Centurion cards will be discontinued.
American Express is adding:
- Starting in mid-September, Membership Rewards cardholders can earn two points for each dollar spent through the AmEx portal at over 100 online retailers, such as Gap.com and Target.com.
- On Sept. 1, cancellation insurance for tickets to concerts, plays, and sporting events bought using American Express will be offered to Gold, Platinum, and Centurion small-business and consumer cardholders.
- Beginning on Oct. 1, Gold, Platinum and Centurion cardholders will have access to free roadside assistance no matter how far they are from home.