What is an American Express Financial Review and how to avoid it?

In the world of point-hunting, signing up for new credit cards andoptimizing our purchase categories for free (or nearly free) travel is perfectly legal. However, when “abusing the system”, this type of conduct can trigger an American Express financial review or future denials on new applications.

Although all banks can carry out this process (and each in their own way), Amex is the one that does it most frequently according to feedback; both to detect abuse and fraudulent behavior.

There’s a grey area when it comes to the definition of abuse; when the conditions described in the terms and conditions are met, there shouldn’t be a problem.

When you are subject to an American Express financial review, the first indicator is that your card gets declined when you try to make a purchase.

Then, when you log in to your account, you’ll be told that your account (and all your cards) are suspended, and instructed to call customer service.

Next, you will receive an email or letter confirming that your account has been frozen and instructions on how to proceed; Amex will ask you to provide several documents within 14 days for them to investigate.

During this time, you can’t use your credit cards, and you can’t access your Membership Rewards points either. So, if you have pre-authorized payments set up, it’s important to pay your bills manually in time for the American Express Financial Review.

By speaking with an agent, you can usually get an idea of the motive for the review based on the questions they will ask you and the documents requested.

The documents required are usually your tax returns, notices of assessment, bank statements, pay stubs, etc. You can submit these documents electronically through the website or by fax; when done, confirm receipt with an agent.

It’s very invasive in terms of sharing your personal information, but if you don’t do it, you guarantee yourself a closure of all your accounts and the loss of your Membership Rewards points as well as any current statement points that have not been transferred to other programs.

Here are some examples to better illustrate and understand these types of behaviors as well as more feasible alternatives.

Pierre uses his American Express Cobalt^MD Card routinely, putting between $500 and $600 on it every month since he acquired it. Most of his purchases are made at thegrocery store, where he swipes a few gas or SAQ gift cards here and there to receive 5X points on most of his usual spending.

Then, Pierre decides to redo his kitchen and bathroom because they’re no longer to his taste, so he uses the same strategy with gift cards to pay for his purchases at IKEA. Suddenly, he’s spending over $2,000 a week at the grocery store for 2 months while he renovates. Peter’s behaviour may result in a financial review by American Express.

In Pierre’s case, it would have been more astute to sign up for a new credit card to unlock a bonus; he would have accumulated many more points while behaving more “normally”.

Sylvie, the retiree, reported an income of $20,000 when she signed up for her credit card. All Amex cards do not require a minimum income, but they are requested. Sylvie used her savings to pay for $30,000 worth of complex dental treatments over 6 months and earn points at the same time.

Sylvie may also be subject to an American Express financial review even if her balance is paid in full, since her purchase volume exceeds the income she had on file.

Finally, Joseph received a $2,000 credit limit on his new American Express^MD Gold Rewards Card. However, he needs much more than that to cover these monthly expenses, which are more in the $10,000 range. So Joseph starts by paying off his card regularly to ensure the limit is never reached so that he can charge all of these purchases; he therefore “recycles” his credit limit.

Although harmless and completely legal, Joseph’s account can be examined with this kind of behavior.

In addition to these three situations, there’s also payment bouncing and overuse of the “check purchasing power” and “limit pre-authorization” tool on payment cards that may raise the flag for an American Express financial review.

All of these cases can be justified, but Amex’s algorithms seem to look particularly for these types of behavior.

To clarify, spending a large sum of money is not always the cause of an American Express financial review. Indeed, some cards like the American Express^MD Aeroplan^MD* Reserve Card push us to carry more than $25,000 a year to unlock the Air Canada Buddy Pass World. It’s really more about detecting irregularities.

If you’re facing a financial review from American Express, the important thing is to act quickly and show them that you haven’t done anything that violates the terms and conditions of your credit card agreement. A financial review does not automatically mean that your account will be closed and your points withdrawn.

This event is far from pleasant like getting a bonus, but at the end of the day, the lender always has the final say and you have to follow the rules they set.