American Express is beginning to notify cardholders - via monthly statements - of new restrictions specifically aimed at... prepaid gift cards. Explanations.
Prepaid Gift Card Restrictions
Without the ability to use American Express cards directly at retail locations (such as Costco, which only accepts Mastercard), many American Express cardholders had resorted to prepaid gift cards.
These gift cards can be purchased directly in grocery stores or convenience stores… and can even be reloaded regularly, and used immediately.
After limiting the American Express Cobalt Card 5 points-per-dollar categories to $30,000 in annual purchases, American Express has decided to take it a step further by directly addressing the issue of prepaid gift cards.
Here’s the note that’s starting to show up in cardholder statements about the Membership Rewards program:
Effective July 5, 2019, the following changes will apply to the Membership Rewards Terms and Conditions: When You Will Not Earn Points: We have clarified that certain transactions (now known as “cash equivalent transactions“) are not eligible to earn points. We also now have the right to deduct points awarded to your points account if we determine that they should not have been awarded. . In addition, if we feel you intentionally take steps to get points to which you are not entitled, we may consider this to be an abuse of the program.
As such, these new rules will take effect as of July 5, 2019, and warn registrants who would “abuse the program” in an effort to intentionally obtain points to which they are not entitled.
American Express now reserves the right to deduct points from the account after the fact.
A new definition was added for cash equivalent transactions as follows: means using your card account to obtain or forward cash or something that is easily converted into cash. Examples include: purchases of foreign currency, gift cards (purchasing and reloading), traveller’s cheques, money orders, bank drafts, casino gaming chips, wire transfers and all similar transactions. It also includes balance transfers, cash advances, person to person payments, and the use of credit card cheques and other similar devices or offerings, whether offered by us or through a third party.
This clearly refers to prepaid gift cards of the Vanilla type: American Express refers to these as ‘easily convertible to cash’.
We do not believe that store-linked gift cards (SAQ, Amazon, GAP…) are affected by this measure: these cards can ONLY be used in specific stores, unlike prepaid gift cards, some of which can even be emptied in an ATM and thus be “easily convertible into cash”.
These new rules apply to the 6 cards in the Membership Rewards program:
- American Express Cobalt™ Card
- American Express® Gold Rewards Card
- American Express Platinum Card®
- American Express Business Edge™ Card
- American Express® Business Gold Rewards Card®
- Business Platinum Card® from American Express
American Express is tightening the screws to prevent abuse of its Membership Rewards program. As far as we know, in Canada, institutions do not have the technical means to know what you buy when you go to the grocery store or the corner store (in the United States, issuers have access to level 3 transactions – whereas in Canada it is level 2).
However, it is obvious that abnormal behaviour (a $500+ purchase at Couche-Tard is not a usual behaviour) will be detected automatically… prompting American Express to take punitive measures on the identified accounts.
It is likely that American Express has been pressured by merchants selling prepaid gift cards to deal with the influx of customers buying… only prepaid gift cards. The interchange fees paid (between 3 and 4%) are not profitable for a merchant if no other products are purchased in the store.
But it’s unfortunate to be prevented from using an American Express card… anywhere: let’s hope that if American Express doesn’t close in on itself, it will take the lead to convince new merchants to accept its cards!
This is already the case with the Shop Small initiative, which is gaining momentum with many small merchants now accepting American Express.
But seeing an IGA or Maxi accept American Express would be nice!
In the meantime, we will continue to shop at Metro / Super C… and earn lots of points there in those 5 point per dollar American Express Cobalt Card categories!
Source: Thanks to Mathieu L. for the information