American Express for Newbies

American Express for Newbies: The Big, the Bad, the Beautiful

American Express is arguably one of the most prolific and well known financial services companies today, with a global presence that rivals all but the largest banks.  Their history, stemming from humble beginnings as an express mail company in 1850, has stood the test of time over the past century and a half.  In this period, the company has pursued numerous business ventures, including investment banking (acquisition of Lehman Brothers in 1984), retail investment services (IDS, which became American Express Financial Advisors, before finally being spun-off as Ameriprise in 2005), and even cable television (partnership with Warner Communications in 1979 to create AMEX-Warner Satellite Entertainment, which created the popular MTV and Nickelodeon channels).

Today, American Express, or AmEx for short, now focuses on credit products (credit and charge cards, merchant services), online banking (online savings accounts), and travelers’ cheques.  Most of the retail public may deal with AmEx most frequently as charge/credit card customers, and, in light of the fallout from the 2008 credit crisis, more business owners and consumers than ever are looking for a reliable financial services company to partner with.  Is American Express a company that you want to do business with?  First, let’s understand what they offer, then go over their strengths and weaknesses.

American Express’s card business revolves primarily around three types of customers: personal cardmembers, small business owners, and corporate accounts.

Personal Cardmembers

Personal cardmembers are individuals who are members of the public, like you and me.  These customers use American Express card products for a variety of reasons, which could be anything from participating in AmEx’s reward programs to enjoying AmEx’s reputation for premium customer service and perks.

Small Business Cardmembers (OPEN Division)

American Express deals with small businesses on two fronts: one side being a provider of merchant processing, and the other being a lender.  As a lender, AmEx offers credit and charge card products to business owners to help them manage their expenses and participate in reward programs, among other reasons.  As a merchant processor, AmEx can offer services to assist businesses in accepting debit and credit cards from their customers.

Corporate Accounts

If you work for a large company and have access to a consolidated expense account, you may be familiar with this system: you can make charges to your expense account and have it reimbursed later by your company upon reconciliation. Corporate accounts are separate from small business cardmembers and are usually for larger organizations with many employees.

American Express: Reasons to Use Them

American Express has strengths that have allowed them to command 24% of the U.S. credit card volume (as of 2009) (1) and remain the “best credit card issuer” for four years in a row, as of April 2010 (2).  Most of the benefits are related to two core categories: rewards and customer service.

American Express Loyalty Programs (Membership Rewards System)

American Express, like many card issuers, has a proprietary rewards system that encourages existing and prospective customers to use their products more frequently and in a higher capacity.  Since AmEx pulls in a large amount of revenue from merchant fees, it makes sense for them to encourage more fee generation.  Though the Membership Rewards program faces competition from other card issuers’ catalogues, it still has a variety of benefits that many cardmembers can make use of.  American Express has also retained extensive and exclusive relationships with hotels, airlines, and travel agencies, granting their program travel deals and promotions that may not be found elsewhere.

Variety of Products

American Express offers both in house products and co-branded cards with their partners; examples of “big name” card partners include Costco Wholesale, Hilton Hotels, Starwood Hotels and Resorts, Delta Airlines, and JetBlue Airlines.  AmEx’s extensive line of card products include traditional charge cards, cash back reward cards, travel cards, hotel cards, luxury cards, and small business cards.  The selection is quite large and can easily accommodate the needs of all but the most discerning consumer.

Advanced Technology

American Express has a very sophisticated online portal available for their cardmembers, which allows them to manage their credit accounts from their computer or even from a their mobile device (AmEx has their own iPhone application and is currently expanding to other devices).  I have used the online banking portals of a variety of other institutions, and while they offer many of the same features as AmEx online, the execution and coding of their platforms are not as smooth.  For example, I have experienced many glitches and bizarre errors from time to time with a major U.S. bank’s online service, but have never experienced anything less than perfection from the AmEx website.  This experience has been consistent across all of my Apple computers and my mobile device.

Premium Customer Service

Here’s a huge selling point that I believe is often glossed over when comparing card companies.  If you place large amounts of purchases on your credit cards like I do, it is imperative to have some peace of mind in place: the knowledge that your card issuer has the ability and know-how to address any future issues that may arise with your account.  From personal experience, I know that everything can be rosy and peachy in the world one day and completely different the next, so I am very cautious with who I decide to handle my business and personal accounts.

In dealing with credit unions, banks, and credit card companies throughout the years, both as a consumer and business owner, I have found that American Express has consistently delivered a level of service that is both efficient and friendly.  For U.S. cardmembers, they have call centers open 24/7 and situated domestically, with no outsourced calls directed to foreign countries.  Upon entering your basic information in the automated system, you are connected within ten seconds to a live representative, which is also a nice touch.  The call center reps, I’ve found, have a higher level of authority given to them to make changes on your account if necessary, and I have never been “shuffled around” from department to department like I have been before with other card issuers and banks.

American Express: What to Look Out For

To be clear in making this a fair and balanced review, there are also several negatives involved in working with American Express.  After all, there is no company I have ever seen that can be considered “perfect,” and I believe it’s important for a customer to understand both the strengths and the limitations of the company they deal with so that they can set their expectations accordingly.

American Express Card Acceptability

American Express credit products are not as widely accepted as the more frequently used networks, Visa and Mastercard.  Many merchants, for their own reasons, will not accept AmEx cards at their establishments, which means as a cardmember, it is highly recommended that you carry around a backup credit/charge card.  There’s nothing more embarrassing than hearing the dreaded “we don’t accept American Express” line at the cash register and having no other sources of payment available on your person.

“No Spending Limit” Charge Cards Actually Have a (Hidden) Limit

American Express claims its family of charge cards (Zync, Green, Gold, Platinum, Centurion) have no spending limit, but they actually do.  AmEx consistently monitors your spending habits and also your credit reports; if they feel that your spending habits fall out of line with what they are comfortable with, they can shut down your card temporarily to new purchases until you make a payment or call their service line to “unlock” the account.  Under an obscure and bizarre policy, AmEx will also not tell you what your exact internal charge limit is; you have to more or less “guesstimate” by running test charges through your card online or over the phone.  If you plan on placing a large purchase on your AmEx charge card, it is recommended that you call them first to “test” the charge before potential embarrassment ensues in the form of an unexpected decline.

The fact that they can suddenly lock your card can cause more trouble than you think.  If at any point AmEx feels uncomfortable with your spending, and they freeze your account, all of your automatic payments coming off of your card account (utilities, subscriptions, car payments, etc) will bounce until you unlock your account.

The Dreaded Financial Review

American Express has been notorious for conducting a process known as the Financial Review.  This review process is basically an audit of a cardmember’s financial status using a combination of internal data, credit reports, and tax records.  Refusing to comply with the Financial Review or not submitting all requirements within the given deadline can potentially freeze, or worse, terminate all of your existing American Express accounts.  For a small business or consumer that has daily and/or reoccurring automatic charges paid for by their AmEx accounts, the consequences of failing to complete a Financial Review can be devastating.  Fortunately, Financial Reviews are relatively rare in frequency.

Should You Do Business with American Express?

If you know how to manage credit and appreciate good customer service, I think American Express should be one of your financial services providers.  American Express has a long history in the consumer finance industry and also maintains strong relationships with small businesses and larger corporations. They have made it painfully obvious to cardmembers, including myself on multiple occasions, that they want to earn more business from their customers and also welcome new cardmembers to their company.

Of course, American Express is also quite sensitive to past transgressions.  If you have annoyed them in the past (some easy ways to accomplish this is charging off AmEx accounts, making payments late, abusing rewards programs, etc.) they may refuse to extend you credit again: permanently.  Before dealing with American Express, it is highly recommended that you learn to utilize and manage credit wisely, if you’re not doing so already.

In conclusion, AmEx has a decent cardmember rewards program, efficient customer service, and a variety of online tools to make life easier as a consumer or businessperson. Though they are far from the “perfect” company, I find dealing with American Express to be a straightforward and painless experience, which in turn reduces my stress levels and allows me to focus on more important things in life.  If you don’t have an American Express card yet, I would highly recommend reading the reviews of their latest offerings and see if they offer a product that makes sense for you and your lifestyle.

Sources:

1) http://ir.americanexpress.com/phoenix.zhtml?p=irol-eventDetails3&c=64467&eventID=2248458

2) http://money.cnn.com/2010/08/19/pf/credit_card_satisfaction/index.htm

Disclaimer: This content is not provided or commissioned by American Express.  Opinions expressed here are author’s alone, not those of American Express, and have not been reviewed, approved, or otherwise endorsed by American Express.  This site may be compensated through the American Express Affiliate Program.