American Express Drops Fees on Gift Cards
Wednesday, September 30, 2009; 12:11 PM
American Express announced Wednesday that it would immediately eliminate monthly fees on gift cards.
Consumers no longer will have to pay $2 a month if they haven't used up the balance on their cards after a year.
"We think this is great for the consumer. It's great for the industry. It's right for the times," said Alpesh Chokshi, president of Global Prepaid for American Express.
Gift cards have come under fire in recent years because they often come with fees for services such as activating or replacing them. Many also have expiration dates.
The credit card law that President Obama signed in May prohibits gift cards from expiring for the first five years. Fees can't be assessed unless the card has been dormant for at least 12 months. The gift-card provision of the law takes effect in August 2010.
Some financial institutions have been making consumer-friendly changes in anticipation of the new credit card law, most of which will be implemented in February. Bank of America, for instance, recently introduced a basic credit card with one interest rate for all types of transactions. Last week, several banks, including Bank of America and J.P. Morgan Chase, eliminated some overdraft fees, which they charge after allowing customers to overspend their accounts, after Sen. Christopher J. Dodd (D-Conn.) said he would propose legislation cracking down on the practice.
Chokshi said the new law governing gift cards did not influence American Express's decision to get rid of the monthly fees.
"What we're doing here is going far, far beyond that and saying there will never be monthly fees," he said.
American Express gift cards already have no expiration dates. Customers do pay a fee, ranging from $2.95 to $6.95, to buy the cards.
Linda Sherry, director of national priorities for Consumer Action, praised the change but said it might not affect many people. "It will come as a welcome thing to some people who like to hold on to their gift cards," she said. "I'm kind of wondering how many people it will thrill. Most people go out and spend their gift cards right away."
The change will apply to American Express cards currently on sale, those headed to the market for the upcoming holidays and those that customers have already purchased.
American Express gift cards are available at more than 70,000 outlets such as banks, supermarkets and shopping centers.