American Express is raising interest rates for more than a million of its credit-card customers, with an average increase of 2.5 percentage points, Bloomberg News reported on Wednesday (Feb. 25).
The rate hike, which is the first general increase by AmEx in more than five years, surfaced after the company sent letters telling many cardholders that their rates were lower than those for competing cards for customers "with similar credit profiles," Bloomberg reported after obtaining a copy of the letters.
AmEx made a similar move, but on a smaller scale, last year when it told several hundred thousand customers it was raising their rates for similar reasons. Like this month's round of rate hikes, that stemmed from a 2014 analysis that found AmEx's rates hadn't kept up with its competitors.
"We analyzed our credit-card portfolio last year and found customers that had APRs considerably lower than market rates, sometimes as low at 3.25 percent," AmEx spokeswoman Elizabeth Crosta told Bloomberg. A variety of factors can change over time, "making it appropriate to reassess a customer's APR," Crosta said.
She added that the increased interest rates will apply to new purchases and balance transfers for variable-rate credit cards, including some co-branded cards like the ones for Costco and JetBlue, which AmEx announced this month will end. But the new rates are no higher than new consumers pay if they apply for a comparable AmEx card today, Crosta said. New AmEx credit accounts have a minimum rate of 12.99 percent.
The new increases can't go into effect until at least next month, because under the 2009 federal law dubbed the CARD Act, card issuers must notify customers 45 days before an interest rate increase. The hikes also won't affect the vast majority of AmEx cardholders, whose cards must be paid off at the end of each month. More than 42 million of AmEx's basic cards were being used in the U.S. in 2014.