Note To Customer: Get Lost

Tony Wanless

| February 25, 2009

Image by: iStock

In the midst of a recession, the credit card company American Express is offering “selected customers” a $300 AmEx prepaid gift card if they pay off their balances and close their accounts.

Other US credit card issuers, equally hard hit by escalating payment defaults, are expected to follow suit. Okay, so we can see encouraging delinquent account holders to pay up. After all, the interest they’re racking up is meaningless if they don’t. Also, they’re a drain on the business, because under the revolving debt system used by AmEx and other credit card companies, the issuer has to borrow to carry that debt. But to tell some customers to get lost? In these days of customer empowerment, who woulda thunk it?

When you look beyond the obvious though, it makes sense. In the old days (ie pre-crash), business was all about gathering masses of customers to boost the top line. That’s why you saw freebies doled out just to get a customer on the books. Then you could upsell some product to them or at the least sell advertising space to other businesses who wanted to reach them. With this 20th Century mass thinking, you assumed that 1,000 listed “customers” might produce 100 profitable ones and the free riders were just a cost of doing business.

So you had companies that were in “high growth mode” spending 99 cents (and often more) on a customer for every dollar brought in. But now, we’re in reverse. In future, business health will be measured by the bottom line – profitability – not by revenue. Instead of measuring success by how many customers they have, businesses will be forced to look at how much they’re earning from each customer.

This belief, which governed business for a thousand years or so is, in the words of one not-very-original observer, “a huge paradigm shift.” Well, say hello to a new world where old truths are back into fashion. Simply, if a customer today isn’t paying his way, he’s outta there.

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I for one would be pleased

Submitted by Anonymous on Wed, 2009-03-04 10:04.

I for one would be pleased to take the 'buy out'. Amex is not accepted as universally as Visa for example, and this is due to their insistence to maintain higher-than-competitor retailer transaction fees. Add on the yearly subscription fees and high interest rates on balance carry-overs and it is an unattractive credit card option for many. Where do I ‘sign up’ to be removed from the list?

This move is not just about

Submitted by Anonymous on Tue, 2009-03-03 19:21.

This move is not just about getting rid of bad customers - it's about survival. AMEX, like the investment banks, was forced to file for a change in status so that they could accept retail deposits and tap into the big bailouts. They are not just getting rid of delinquent customers, they are eliminating even the possibility of existing customers taking on new debt by reducing their credit limits. I've never missed a payment, yet they dropped my limit by $8000 on my last statement. That's a real piss off too, as I use the card for business and need a decent limit from time to time. AMEX has burnt though a ton of good will in this process. They may survive the short term through aggressive actions like these, but they will be in a much weaker competitive position going forward. Oh, and if the recession hits me personally? Guess who is tops on my "not gonna pay 'em" list.