How Amex Is Trying To Get You To Pay Your Annual Fee

It has become the norm now for many credit card issuers to waive the annual fee for your first year of card membership. The card issuers are banking on the fact that you will use the card enough that they can recoup the cost of the sign-up bonus in swipe fees and future annual fees. Many people now, however, will cancel their card when the annual fee comes due. This has led card issuers like American Express to try a new tactic to get you to keep your cards and pay the annual fee.

When the annual fee on any of my credit or charge cards comes due, I will, with rare exception, call the card provider and either cancel or downgrade the card to a no annual fee version. The card providers know that there are people out there who will simply cancel after the first year and move on to another card. To combat this, American Express has rolled out a tiered sign-up bonus on cards like their Premier Rewards Gold (“PRG”) card.

Historically, the best publicly available offer on the PRG has been 50,000 Membership Rewards points (“MRs”) after $2,000 in purchases on the card in the first 3 months.

PRG 8

To get this offer, you often need to navigate to the American Express site using a private browsing or incognito mode on your browser. It is well worth the added hassle though as the normal offer on the PRG is a mere 25,000 MRs after $2,000 in spend on the card in the first 3 months.

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While using the incognito browser trick to try and secure a 25,000 MR offer on the EveryDay card, I noticed an offer on the PRG for 65,000 MR points – the highest publicly available offer I have ever seen on that particular card.

PRG 2

When I started to read the fine print on the offer, I noticed that Amex is getting clever with their bonus offerings. You see, with this offer, you earn 40,000 MRs after spending $2,000 on the card in the first 3 months, and then an additional 25,000 MRs after spending $2,000 on the card between August 20, 2017, and November 20, 2017.

PRG 6

While the annual fee of $195 is waived for the first year, it is not waived for the second year. That means to earn the full 65,000 MRs, you would need to keep this card past the first year and thus pay the $195 annual fee. That is quite a clever way for Amex to structure their highest offer yet on the PRG card.

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So, is it worth it? Let’s run the numbers and find out. I am not one of those bloggers that assigns an arbitrary value per point on my points. To me, it is kind of a useless metric as everyone will have different factors that they use to evaluate the value of their points at any given time and for any given redemption. Rather, the numbers I am going to run are going to be the tangible value you can receive out of the PRG by utilizing the 65,000 MR offer versus the 50,000 MR offer.

The PRG offers a $100 statement credit for airline incidental fees per calendar year. That means if you picked this card up in July, you would receive a $100 statement credit in 2016, and would be eligible for an additional $100 statement credit in 2017 before your annual fee comes due. So both the 50,000 and 65,000 MR offers are going to provide you with $200 in value right off the bat.

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Realistically, the $100 airline credit per year is the only tangible value the PRG card offers. So that just leaves the sign-up bonuses.

If you opted for the 50,000 MR offer, you would receive 52,000 MRs (50,000 sign-up bonus + 2,000 from meeting the minimum spend (assuming no category multipliers). Assuming you canceled the card when your first annual fee came due in a year, that means you would have paid $0 out of pocket for the annual fee, received at least 52,000 MRs and would have offset $200 in airline fees/costs. Not a bad haul!

If you opted for the 65,000 MR offer, you would receive 42,000 MRs (40,000 sign-up bonus + 2,000 from meeting the minimum spend (assuming no category multipliers) for the first year. You would then pay the $195 annual fee and receive 27,000 MRs (25,000 sign-up bonus + 2,000 from meeting the minimum spend (assuming no category multipliers) for the second year. Assuming you canceled the card at the end of the second year when your annual fee came due again, that means you would have paid $195 out of pocket for the annual, received at least 69,000 MRs and would have offset $300 in airline fees/costs.

When you break the offers down, it really boils down to this – would you pay $195 for ~17,000 MRs? That works out to about 1.1 cents per MR. If you have a use for the MRs, that could be worthwhile. If not, well then you may just be better off with the 50,000 MR offer, followed by picking up the no annual fee EveryDay card right before your PRG annual fee comes due.

As a reminder, these are the MR transfer partners along with their respective transfer fees (if applicable):

Transfer PartnerAllianceTransfer FeeTransfer Time
DeltaSkyTeam$0.0006 Per PointSame day
AlitaliaSkyTeamNoneSame day
Air France/KLMSkyTeamNoneSame day
AeromexicoSkyTeamNoneUp to 7 days
British AirwaysOneWorldNoneSame day
IberiaOneWorldNoneUp to 7 days
Cathay PacificOneWorldNoneUp to 7 days
Air CanadaStar AllianceNoneSame day
ANAStar AllianceNone2-4 days
Singapore AirlinesStar AllianceNoneUp to 3 days
Virgin AmericaN/A$0.0006 Per PointSame day
Virgin AtlanticN/ANoneSame day
Jet BlueN/A$0.0006 Per PointSame day
Hawaiian AirlinesN/A$0.0006 Per PointSame day
El AlN/ANoneSame day
EmiratesN/ANoneSame day
EtihadN/ANoneSame day
Choice HotelsChoice Privileges RewardsNoneSame day
HiltonHilton HHonorsNoneSame day
SPGStarwood Preferred GuestNoneSame day

So why does this work for Amex? Well, several reasons. First and foremost, structuring an offer to be earned over 2 years makes sure that you are going to keep the card past the first year and pay the annual fee. Second, structuring the offer so it requires a second minimum spend makes sure that Amex is going to be earning swipe fees on merchant charges when you use your card. Third, by placing an arbitrary date period within which to meet a second minimum spend more than a year from now, Amex is betting that a fair amount of people will forget about the offer and not meet the minimum spend for the additional points. In that scenario, Amex gets your annual fee for the second year and does not have to pay out as many MRs to the account. And lastly, because Amex is hoping that consumers are easily swayed by seeing the bigger bonus number and won’t bother reading the fine print.

Which offer is best for you is something that only you can determine when weighed against your future travel plans/goals. For me personally, I would probably opt for the 50,000 MR offer as I do not use MRs very much anymore now that the transfer ratio to British Airways is 1:0.8.

Final Thoughts

I think you have to give American Express credit (ha!) for thinking outside the box a bit on this one. A lot of people in the points and miles game – myself included – will cancel or downgrade their cards to a no annual fee card once their first annual fee comes due. This is a unique way for American Express to keep your business for an additional year (which likely means more profits from card usage swipes at merchants), while also ensuring that you pay your annual fee. The extra 15,000 points would not be enough for me to pay a $195 annual fee as I do not personally value MRs highly, but it might be for a $95 annual fee card.

Does this new approach by American Express make you more or less likely to pay an annual fee on your cards?

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