Copied and Pasted By Jennifer Ng
It used to be that credit-card companies lured customers with cash rewards. Now American Express Co. is paying to get rid of them. The card issuer is offering selected customers a $300 AmEx prepaid gift card if they pay off their balances and close their accounts.
The unusual move underscores how quickly conditions have deteriorated in the credit-card market. The current economic morass was provoked by spiking mortgage defaults. But as the economic crisis widens and unemployment climbs, there is growing concern that credit-card defaults will soar into the stratosphere as well.
"This is a huge paradigm shift," says Curtis Arnold, founder of CardRatings.com, a credit-card review Web site. He says he expects other large companies to follow suit with offers to entice consumers to pay off their balances, as card issuers cope with increasing defaults.
Selected members -- the company wouldn't disclose how many -- began receiving letters with the voluntary offer earlier this month, according to Molly Faust, an American Express spokeswoman. "It's a relatively small number of cardmembers who have sizeable balances and little spending and payment activity," she says.
AmEx declined to disclose the specific criteria used to determine who is eligible for the offer. However, Ms. Faust did say that it was offered only to retail credit-card holders, not corporate accounts. Customers who received the offer have until Feb. 28 to respond.
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