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American Express has been on the hunt for people “gaming” the system via credit card applications. At the end of last year, American Express created a Rewards Abuse Team (RAT), which was meant to crack down on people abusing their rewards system. We’ve also seen them crack down on people earning sign-up bonuses by buying gift cards and applying for cards with promotion codes not originally sent to them.
The new terms and conditions
Well now American Express has added restrictive language to their Delta credit cards which states the following:
If we in our sole discretion determine that you have engaged in abuse, misuse, or gaming in connection with the welcome bonus offer in any way or that you intend to do so (for example, if you applied for one or more cards to obtain a welcome bonus offer (s) that we did not intend for you; if you cancel or downgrade your account within 12 months after acquiring it; or if you cancel or return purchases you made to meet the Threshold Amount), we may not credit Membership Rewards to, we may freeze Membership Rewards credited to, or we may take away Membership Rewards from your account. We may also cancel this Card account and other Card accounts you may have with us.
American Express reserves the right to modify or revoke offer at any time.
Qualifying purchases are purchases for goods and services. Qualifying purchases do NOT include fees or interest charges, purchases of travelers checks, purchases or reloading of prepaid cards, purchases of gift cards; person-to-person payments, or purchases of other cash equivalents. Additional terms and restrictions apply.
The big take-a-ways here are that they may freeze or take away your Membership Rewards or close your accounts if they “determine that you have engaged in abuse, misuse, or gaming in connection with the welcome bonus offer in any way or that you intend to do so.”
Amex offers some examples to illustrate (which means these are not exhaustive). These examples include if you have:
- Applied for one or more cards to obtain a welcome bonus offer (s) that we did not intend for you
- Cancelled or downgraded your account within 12 months after acquiring it
- Cancelled or returned purchases you made to meet the Threshold Amount
Gift cards and person-to-person payments (PayPal, Venmo, etc.) are also not listed as qualifying payments.
These new terms sound hard core but I don’t think it’s a far departure from what American Express was already doing for a while. We’ve known that American Express will freeze or even claw back points if they suspected abuse. And while rare, we’ve known that failing a financial review (usually by not complying), can lead to account closures. So this is likely an issue of covering legal liability (perhaps a result of many filing CFPB disputes).
Still, the fact that these new terms are in now explicitly stated could mean that American Express might more aggressively enforce their terms. They are also very open-ended. If they determine that you “intend” on engaging in abuse, misuse, or gaming, they can shut down your accounts. I’m very curious what would constitute an “intent” to abuse rewards versus actually engaging in abuse. Also, if they decide an offer was not intended for you, they can yank your points.
Aside from the vague nature of the word “intend,” I don’t have an issue with these terms. In fact, I don’t mind Amex taking steps to get rid of people who do things like meet a minimum spend bonus and then return the items or cancel a card as soon as a sign-up bonus hits. These people bring a bad name to this hobby — it’s entirely possible to play nice and by the rules while still playing the game.
Moreover, nobody should be canceling credit cards within 12 months, anyways. You should wait until the annual fee hits and then see if you can get a retention offer or the annual fee waived. If that does happen, then you should hold on to the credit card and allow it to continue to age so that you can increase the average age of your accounts and benefit your credit score. If they don’t waive the annual fee, just cancel or downgrade your card within 30 days and avoid the annual fee if you want to (Amex doesn’t offer prorated fees any longer).
I’m a little surprised to see that downgrading is prohibited since there could definitely be legitimate reasons for downgrading cards within 12 months. But then again, that’s been a loophole around for some time that Amex is also probably trying to close since it’s costing them money, so it’s hard to blame them.
It will be interesting to see how the affects leaked offers and offers received via Incognito browsers. My guess is that the former will continue to come under scrutiny but the latter will be allowed.
H/T: Churning via Flyertalk.
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Daniel Gillaspia is the Founder of UponArriving.com and creator of the credit card app, WalletFlo. He is a former attorney turned full-time credit card rewards/travel expert and has earned and redeemed millions of miles to travel the globe. His content has been featured in major publications such as National Geographic, Smithsonian Magazine, Forbes, CNBC, US News, and Business Insider. Find his full bio here.