Study: American Express Has Most Obtuse Penalty APR Polices

If you’re gonna get kicked in the pants, wouldn’t you at least like to know why? Well, American Express is the least clear in how they communicate their penalty interest rate policies, a new Card Hub survey finds.

Credit card companies start charging you a penalty APR, raising your interest rate, for things like being more than 60 days late on payments, exceeding your credit limit, or for bouncing your payment checks.

Card Hub scoped out the fine print of the top 10 card issuers and rated each in four categories from poor to excellent: clarity on penalty APR trigger, clarity on portion of balance affected, clarity on how to get back to regular rate, and clarity on APR changes during the first 12 months.

Of the top issuers, American Express alone drew poor marks across the board for not explaining very well how the penalty APR works. Their policy doesn’t even mention that being more than 60 days late triggers the penalty APR to activate. But maybe they just didn’t have good role models; because the Federal Reserve doesn’t explain it either, except in a later explanation of how you can lose an introductory APR.

Penalty APR Study – June 2010 [Card Hub]

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  1. Jeanyuhs says:

    Who cares how their APR works? Just take their card for free, pay the balance in full every month and then buy stuff with your points. That is how you stick it to the man…

    • msbask says:

      Why is there always at least one person whose answer to credit card discussions is “pay your balance in full every month”?

      Has it ever occurred to you that other people don’t, can’t or won’t for whatever reason there may be? And that these types of consumerist articles and discussions actually have value to some people?

      When the problems with Toyota brakes came out, did you suggest that people just not drive???

      • Jeanyuhs says:

        Why so serious?

        And yes, if you have a car with bad brakes it would be wise not to drive it. Likewise, if you don’t have any money, it would be wise not to spend it. -Chinese Proverb

        • Randell says:

          Why do you think that is the case? If I have credit and can use somebody else’s money to fund things I am better off than you. My 3.9% card allows me to buy things I want and use my cash to invest at a year to date return of nearly 9%. YOU my friend are a financial idiot if you think your way works better than mine.So just crawl into your hole and stfu.

          • Jeanyuhs says:

            Why so serious?

            Well apparently you have it all figured out. Congrats…

          • NeverLetMeDown says:

            If you think you’re getting a zero-risk after-tax near-term return of 9%, then YOU, my friend, are the idiot.

    • Polish Engineer says:

      Yes, who cares about the terms and conditions, and hence price, of your credit…. except those people who actually carry a balance, or are unemployed, or have gotten in over their head for whatever reason. I’m pretty sure those groups alone constitute a majority.

      Some people actual use their credit cards to make purchases they cannot pay off all at once, or to tide them over in thin times. To them, which credit cards have transparent terms and which do not may actually be of some value.

    • ghostfire says:

      It must feel nice that nothing bad ever has happened to you, or ever will happen to you, preventing you from paying off your balance in full for even a single month. Other people might like to know.

      • Woofer says:

        It’s not as hard as it sounds. Just pretend credit cards don’t exist and they’re all actually charge cards, and it’s the easiest thing in the world. If you need the extra spending power because you can’t otherwise afford the new big shiny thing, maybe it’s not such a good idea to buy it? Or get new cards because the rest are already maxed?

        As for bad things happening, get over your ego and ask for help. There’s also a reason many people suggest an emergency fund to cover a few months of poop hitting the fan. The people I know in the worst financial holes were either too proud to ask for help or too fascinated with shopping for new things and never bothered to plan for bad times.

        • Polish Engineer says:

          Yes, because it’s so easy for everyone to save money when unemployment is at 10% and the economy has been in the tank for two years. What is a person supposed to do when they have been out of work for two years and dried up their rainy day fund?

          It’s true some people used credit cards to buy big shiny stuff they didn’t need. Other people used their credit card to repair the water heater that blew up in the basement, or to cover school costs when their company stopped paying tuition assistance, or to cover the massive copay from their crappy insurance to get their appendix removed so they don’t DIE!

          So while you are “pretending” you don’t have access to credit, the rest of us will be living in the real world where things happen and we do what we can.

          • Jeanyuhs says:

            Well, I guess we should all be pretty thankful for the thoughtful banker(s) that, through their goodwill and kindness, blessed us with the credit card so that we can make it through life…

          • Woofer says:

            Maybe pretend is the wrong word. Imagine it’s a charge card? Treat it like a charge card? Regardless, don’t assume that spending on a credit card is like using cash.

            And yes, things suck, and 2 years is a long time to rely on an emergency fund of any size. But 2 years? I fall back on my pride argument – there are jobs to get you by. No, they’re not good for your career or resume, but they will get you by. As for exploding water heaters, school costs, and insurance, well, the first is an emergency fund matter. The second is unfortunate, but extra schooling is a luxury if you’re fortunate enough to have kept a job at this point. The last, well, you only have one appendix… Kidding aside, you get the coverage you pay the premium for, and many people rarely if ever even hit the deductible but keep right on paying well over $6k a year for as little as a basic checkup at the doctor ($200 max) and the dentist ($100 max), maybe the optometrist (another $100 max).

  2. satoru says:

    Dunno I like my Amex card for a few reasons

    1) There are still a few stores that only take Amex. So I keep it for them.
    2) Amex never seems to have a hissy fit when I travel abroad.
    3) Keeping it in the vain hope they might upgrade me to a Centurion card :P

    • bitslammer says:

      Do you really want to pay an annual $2500 fee and do you actually spend $21K/month on your current AMEX?

      • RandomHookup says:

        A boy can dream, can’t he?

      • satoru says:

        Indeed it’s mostly wishful thinking. I can barely must spending 10k a year on my Amex let alone the required $250k a year of spending.

        Let me clarify: I could SPEND 250k a year easily. PAYING it off is an entirely different problem :)

  3. hegemony says:

    I learned the hard way when I defaulted on my three Amex cards. I eneded up filing bankruptcy. The joke is on them though because I’m not blacklisted anymore and was approved for another card. Suckers!

  4. COBBCITY says:

    It is behavior like this and insistence that most cards carry annual fees when competitors don’t that is the cause of American Express never being the most used or issued card. It will always be a third tier player with most consumers.

  5. evilpete says:

    I stopped using AMEX twelve years ago when they misprocessed a $5,000 payment check as $500 and suspended my cards (personal & business ) then charged me over $600 for their mistake.

    TWICE IN A SIX MONTH PERIOD!!!

  6. HogwartsProfessor says:

    I apparently can’t get a credit card (I tried, and my bank and Capitol One wouldn’t give me one) but the other day, I got an Amex Blue application in the mail. What’s up with that?

    I shredded and discarded it, but why would they even send me one if I can’t get a card?

  7. joshua70448 says:

    Heh, I like how USAA got “excellent” ratings for most of the categories because they don’t even have a penalty APR. Now, if only they’d explain the first-year disclosure better… (and maybe get rid of the arbitration clause, too…)

  8. madanthony says:

    I wonder if the terms they used were for one of the Amex credit cards, like Blue Cash, or the Amex charge cards (ie the green Amex).

    The Amex charge cards aren’t credit cards – the idea is that you pay the balance every month, and aren’t supposed to carry one. Which might be why they are obtuse about penalty APR’s – because you aren’t supposed to have a balance that’s 60 days plus…

    • NeverLetMeDown says:

      While they were traditionally charge cards, all of the traditional Amex cards now let you carry a balance.

  9. DoubleBaconVeggieBurger says:

    Last year, I had repeated trouble paying my Amex bill online, which resulted in two late payments in 6 months. Both times, I called and explained my payment issues, and they were like, sure, totally understandable, we’ll take that fee right off. But neither one of them mentioned the penalty APR that I was going to get slapped with. I went from like 7.5% to 29.99%. Luckily I was getting ready to pay off my credit balances soon anyway, so I just paid that one first, but still. A little warning would have been nice.

  10. DanKelley98 says:

    At one point in time, Amex was in a class above all other credit card issuers. In recent years, they’ve just become another one of the pack.

    • sweaterhogans says:

      I agree. I really loved Amex and had been a customer for years. I paid on time, and it was so easy to deal with any issues that came up. Then one day out of the blue (a few yrs ago when they were busy dropping people for odd things like shopping at walmart), they dropped me. I was really upset because I NEVER had a problem. They refused to tell me why (even though I has suspicions it was because of a small, outstanding hospital bill).

      Their customer service has gotten worse, and their rewards are easily outshined by so many other cards. Plus, a lot of places don’t take amex, so what’s the point.

    • madanthony says:

      I’ve been happy with my experiences with them so far – through two stolen cards (both of which they tipped me off to) and one $600+ chargeback for an item I never received.

  11. Nick says:

    I call shenanigans. I just went to AMEX’s website, clicked on one of their credit cards, clicked the “terms and conditions” link, and there was a clear statement describing how the penalty/default APR works.

    AMEX’s best (and I think most common) cards are charge cards that don’t have an APR as they must be zeroed out each month. I wouldn’t be surprised if the Card Hub people stumbled around the charge card terms & conditions looking for APR rates that don’t exist.

  12. dkoemans says:

    wow, lots of AMEX hate here. I’m new(ish) to the club but I love my costco amex. Eliminates a card from my wallet (costco membership card), reasonable APR 13%, doubles manufacturers warranty including accidental damage, no annual fee, solid website and cash back on all purchases. Worst cards in my experience: chase visa, sears mastercard, and I can’t save i’ve ever been in love with any card from BofA. My alaska airlines card used to be good but with a $75 annual fee and removing most of the perks, it might get the boot.

    • Fubish says: I don't know anything about it, but it seems to me... says:

      Yep. AMEX is good. Had it for many years and never, ever had any problem. But 60 days before a penalty APR? Bank of America gave me a penalty APR on my two cards when I was ONE WEEK LATE with one payment. My fault, I admit: I had written a check for a payment on the day I got the bill, stamped the envelope, and put it on my desk where it promptly got lost in the mess and I forgot about it UNTIL I fopund it one week after it was due. When I found it, I phoned in the payment (an additional $15 fee) and breathed easier until I got the notice that my APR had skyrocketed on both my accounts because of the one late payment. When I called them about it, the attitude was, “Tough shit, buddy.” Screw BoA. AMEX is better.

  13. Putaro says:

    I had an Amex Gold Card for around 20 years and used to be very positive about Amex. I am outside of the US most of the time and have my mail forwarded to my office. I hadn’t used my Amex for a while so I wasn’t checking the statements carefully and I missed that the annual fee had been charged and I hadn’t paid it. I got a statement that said that if I didn’t pay the balance (just the annual fee plus penalties) by a certain date they would cancel the account. So, I paid immediately, before the date on the statement. The next statement came with a balance as though they had refunded some of the penalties. I thought, “Great, thanks Amex” and went to use the balance at a local store in Japan. They told me at the register that the account had been canceled. Sure enough, I called Amex, spoke with a very rude service representative, and she told me they had canceled the account.

    Congrats Amex, you blew a 20 year relationship over $70 – that was paid. American Express will never get any more of my business or my company’s business.

  14. gman863 says:

    Let’s see…

    American Express. $175 fee. Rental car insurance, free extended warranty, etc. Have to save points for years to get a crappy coach ticket on Delta.

    Chase Sapphire. No fee. Rental car insurance, free extended warranty, etc. Points can be used for anything including 1% cash back redeemable online. 5x points on gas, meals and utility payments through the end of the year.

    Conclusion: Both may suck, but Chase sucks a lot less.