Find the best credit card offers online.American Express recently announced that they are dropping the monthly fees on their gift cards. This comes as fees on credit cards and debit cards are being heavily scrutinized by regulators and industry watchers.
The changes that American Express announced will be applicable to gift cards that are currently in the stores and that are being carried by card holders. In the past, American Express gift cards were usually charged with a fee of $2 one year after the issuance of the card. Also known as inactivity fees, these fees are very common among gift cards in the credit card industry.
A monthly fee can be a heavy financial burden to the card holder. With a $2 fee every month, the amount available in the gift card can be easily depleted over time. The dropping of American Express of these dormancy fees is therefore very welcome among gift card holders.
The question in everyone’s mind right now is whether the recent announcement of American Express a reaction to the upcoming Credit CARD (Card Accountability, Reliability and Disclosure) Act or is it prompted by other reasons. A statement from American Express specifically states that the change on their gift card fees is not a reaction to the reforms on gift cards that will be coming as part of the upcoming Credit CARD Act. The Credit CARD Act is going to go live come February of next year.
The Credit CARD Act is going to introduce sweeping changes to the credit industry in an attempt to level the playing field for both credit companies and card holders. The legislation included in the Act also contains provisions for gift card reforms. By August of 2010, regulations for gift cards specifically banning expiration dates on gift cards will become active. Expiration dates will only be allowed if it has already been five years since the gift card was loaded.
Whether the charging of monthly fees and the resulting depletion of the gift card value can be counted as an expiration date after the fact is unclear. Credit.com spokeswoman Gerri Detweiler said, “That particular issue hasn’t yet been addressed”.
However, one thing is clear. As the Federal Reserve begins to provide guidance for the new rules, issuers will most likely need to tweak their policies, Detweiler said.
American Express isn’t going to be giving up on gift cards anytime soon, either. Gift cards have undoubtedly become one of the most important profit streams for the company. American Express first introduced gift cards five years ago. Now, according to them, they issue the equivalent of $1 billion in gift cards every year. That value is also expected to increase even with the recession going on, according to Alpesh Chokshi, American Express president of global prepaid.
