New From AmEx: Frequent Flyer Fees

If you have a credit card issued by American Express linked to the loyalty programs of Delta, JetBlue, Hilton, or Starwood, you’ll want to get your financial house in order. If you don’t, you’ll either pay more or earn less.

That’s because, beginning in January, American Express will not award miles or points earned during a billing period for which cardholders’ accounts are past due. Once cardholders are current on their payments, American Express will charge a $29 fee to restore the missing miles. That, of course, is on top of the late-payment fee.

Can American Express get away with this? Sure. And it could even be argued that it makes financial sense for them to withhold miles from tardy cardholders. After all, they purchase the miles and points from their airline and hotel partners, and if the cardholder doesn’t pay his or her bill, American Express is awarding miles without being compensated for them.

But while withholding the miles of late-payers might be fair and reasonable, charging them to have the miles credited after they’ve paid up is another matter. Crediting the miles after payment is received costs American Express nothing—the process is entirely automated, requiring no manual intervention. So it’s hard to see the fee as anything other than a gouge.

American Express already has a reputation for high fees and high-handedness generally. Adopting the airlines’ worst habits can only further degrade its image among consumers.

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On a related note, an Associated Press story on the new policy asserts that Chase also withholds miles earned for charges on its United-affiliated credit cards if cardholders are late with their payments (although there’s no reinstatement fee). If so, that’s a new rule—I have a United card and don’t recall ever having my miles held back pending payment.

But that does raise the issue of industry standards. With American Express issuing more travel-rewards cards than any other financial institution, whatever they do stands a better-than-even chance of becoming institutionalized as an industry standard.

Which is yet another reason to decry the new American Express policy.

The follow-on advice here probably goes without saying: American Express cardholders must be ever-cognizant of their due dates, and schedule their payments accordingly. Or else.