American Express Moved to Restrict Signup Bonuses in 2014
In 2014 American Express changed their signup bonus rules to allow one bonus per card type in a customer’s lifetime.
That’s a policy they had in place a decade earlier. It doesn’t just cut off the sorts of customers that Amex wouldn’t want. They cut off customers that are after signup bonuses, but also customers who — despite being clearly savvy in the world of rewards cards — aren’t even aware of the restrictions on personal cards that you’re only eligible for one bonus per product during your lifetime.
Last year I interviewed several senior credit card executives and Bob Daly, Senior Vice President of US Bank for the FlexPerks program shared a story (incidentally sitting up on a panel with the executive in charge of American Express’ Starwood partnership) that he (thought he..) needed to sign up for an American Express card to use at Costco (cough), so he picked the Starwood Amex. He met his minimum spend. When the signup bonus didn’t post, he called in and was told that since he had the card a decade earlier, something he didn’t even remember, he wasn’t eligible.
They’ve Extended the Restriction to Business Cards
American Express backed off of this policy once before. After losing the Costco partnership, American Express wanted to show growth – to show Wall Street it was still a growth company – by any means necessary. I had hoped that would shift them more towards ‘customer acquisition mode’. But after a series of further setbacks they appear to be entering cost cutting mode.
This May be an Unprofitable Move for American Express
When a customer has a bad Delta flight, they get back at Delta the only tangible and immediate way they can: cutting up their co-brand American Express card. Eventually they may fly Delta again, realize they liked the perks like early boarding and free checked bags that come with the card. They see an ad in the inflight magazine and decide to apply. They’re approved for the card, but their bonus miles never post.
A customer who has shown loyalty to a product in the past is likely to be a better customer in the future, and a less expensive customer to acquire, than someone with no history with the card issuer. But that customer is told they’re less valuable than someone who has no history with the issuer.
Some people game bonuses. When a card company is acquiring customers, they are acquiring good customers and bad customers. What counts is the proportion — that the portfolio they’re acquiring is profitable. And it makes sense to try to optimize that, to make the portfolio even more profitable. Blunt instruments like “once in a lifetime” aren’t the way to do it. Instead, it would seem more effective to welcome back cardmembers who demonstrated profitability in the past, or have characteristics that make it reasonably likely they’ll be good customers in the future.
The problem is American Express can’t really pick and choose, they have to be clear in their terms, or they open themselves up to regulatory scrutiny. That’s why the solution for them is targeted offers. While the general application may exclude card bonuses earned more than once in a lifetime, not all offers have to include that restriction and targeted offers might not.
Now more than ever American Express needs growth…