American Express just dropped a bombshell announcement. According to Doctor of Credit (H/T), the credit card company is banning gift card purchases from earning points. Purchasing gift cards was a great way to meet minimum spends to achieve the coveted sign-up bonus. For that reason, this comes as terrible news for many. All American Express cards are subject to this ban. That includes those that earn Membership Rewards (MR) points and cash back.
Sign-Up Bonuses & Manufactured Spending
A clause from the American Express Blue Cash Preferred Card’s terms and conditions were revised as follows:
…Purchases to meet the spend requirement do NOT include fees or interest charges, balance transfers, cash advances, purchases of traveler’s checks, purchases or reloading of prepaid cards, purchases of gift cards, person-to-person payments, or purchases of any cash equivalents.
American Express has noticed their consumers’ spending habits when they first get one of their cards. One can obtain such information from Level 3 (or Third Level) Data. This data tells American Express exactly what a consumer buys at each merchant when you use one of their cards. Level 3 data is also used to prevent manufactured spending by taking back rewards.
A clause from the American Express Gold Card’s terms and conditions were revised to state the following:
… Eligible purchases do NOT include fees or interest charges, cash advances, person to person payments, purchases of gift cards, purchases of travelers checks, purchases or reloading of prepaid cards, or purchases of other cash equivalents.
Unfortunately, the ban also extends to everyday purchases. You can no longer use an American Express card to purchase an Amex gift card and expect to earn MR points. It’s uncertain whether the ban extends to third party gift cards like those from Amazon. Purchases like these are common at Grocery Stores. However, I still would not risk losing points because American Express has access to Level 3 data.
This news should serve as a reminder to not apply for a card unless you are certain that you can hit the sign-up bonus. The ban and American Express’ application rules are designed to stop churning. They should also make you become more strategic when applying for an Amex card.
Remember that you can apply for your card of choice later or simply choose a card from another issuer.