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Amex offers prepaid gift card for closing cards

February 26, 2009

As credit card market deteriorates, American Express is offering selected cardholders a $300 Amex prepaid gift card if they pay off their balances and close their accounts. Selected retail credit-card holders began receiving letters with the voluntary offer earlier February. Customers who received the offer have until Feb. 28 to respond.

There is growing concern that credit-card defaults will soar into the stratosphere as have been happening with mortgage. Consumer credit card delinquencies jumped to a record 5.6 percent in the fourth quarter 2008 from 4.8 percent in the third quarter. As the economic crisis widens and unemployment climbs, the concern about growing default ascends. Unemployment rate rose to 7.2 percent in December 2008, the highest level in 16 years.

As soon as eligible Amex customers sign up for the offer, their card and reward points accumulated while they were customers will be immediately canceled. Members have from March 1 to April 30 to pay off their balances and receive the prepaid card. During that time, the balance is subject to the same interest rates and fees that it would be if they chose to keep their card. If customers don’t pay off their balance by April 30, they will not get the gift card and their accounts will still be closed, says Ms. Faust.

Closing a credit card generally hurts customer credit scores, even if the customers do it themselves.

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