In the world of travel hacking, signing up for new credit cards andoptimizing our purchase categories to travel for free (or almost free ) is completely legal. However, when used with excess, this type of conduct can trigger a financial review from American Express, an essential institution for point hunters.
While all banks may do this process (and in their own way each), Amex is the one that does it more frequently according to feedback; in order to detect both abusive and fraudulent behaviors.
There is a gray area in the definition of abuse; when the conditions outlined in the terms and conditions are met, there should be no problem.
What kind of behavior can trigger an American Express financial review?
When fraudulent activity is detected by Amex’s algorithms, your account may be put under financial review to verify your information.
There is no official list, but the three actions that were reported most often by people who had an American Express financial review are:
- rapid and sudden change in purchase volume
- disparity between reported revenues and purchase volume
- rollover or recycling of the credit limit
Examples of irregular behavior
Here are some examples to better illustrate and understand these types of behaviors as well as more feasible alternatives.
Peter uses his American Express Cobalt™ Card routinely, carrying between $500 and $600 every month since he acquired it. Most of his purchases are made at thegrocery store where he slips in a few gas or SAQ gift cards here and thereto earn 5X points on most of his regular expenses.
Then, Peter decides to redo his kitchen and bathroom since they are no longer to his liking; he therefore chooses to use the same strategy with gift cards to pay for these purchases at IKEA. Suddenly, he’s carrying over $2,000 a week in groceries on his card for 2 months while he renovates. Peter’s behaviour may result in a financial review by American Express.
In Peter’s case, it would have been smarter to sign up for a new credit card to unlock a bonus; he would have earned many more points while showcasing a “normal behaviour”.
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 this information is 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 a financial review by American Express even though her balance is paid in full because her purchase volume exceeds the income she had on file.
Finally, Joseph received a $2,000 credit limit on his new American Express® Gold Rewards Card. However, he needs much more than that to cover his monthly expenses which are more like $10,000. 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 investigated with this kind of behavior.
In addition to these three situations, there are also bounced payments and the overuse of the “Check Spending Power” and “Limit pre-authorization” tools on payment cards that can raise a flag for an American Express financial review.
All of these cases can be justified, but Amex’s algorithms seem to look for these types of patterns in particular.
To clarify, spending a large amount of money is not always the cause of an American Express financial review. In fact, some cards like the American Express® Aeroplan®* Reserve Card push us to spend more than $25,000 a year to unlock the Air Canada Worldwide Companion Pass. It’s really more about detecting irregularities.
American Express Financial Review
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 logging into your account, you will be presented with a notice that your account (and all your cards) have been suspended with a directive 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 by the time the American Express financial review is done.
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.
Does an American Express financial review result in an account closure?
In most cases, no, as long you have not abused the system. Your accounts will be released quickly following a call to let you know the conclusion of their investigation. The American Express financial review was reportedly triggered by irregularities that can be explained.
In some cases, Amex will give you a warning if you are in a gray area. For example, if your actual income does not match what you reported, Amex may lower your credit limit.
However, if you have been abusing prepaid cardsand they notice or suspect it while reviewing your file, the answer is yes.
Most of the cases of sudden closures of accounts without financial review of American Express have been mostly concerning people who went against the rules with the goal of taking advantage of the system:
- sponsored themselves to get new cards
- sponsored people living under the same address
- always stop using their cards after getting the bonus
- tried to get bonuses again on cards they already had in the past
- buy prepaid cards (e.g. Vanilla type)
If you are facing a financial review from American Express, the important thing is to act quickly and show them that you have done nothing wrong.
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.