Jo_PS

Dear all,

A couple of months ago my employer - a big company - cancelled the contract with our previous corporate credit card provider and established a new one with Amex. Thus, I've got an Amex Corporate Card (green) without any options. The bills (e-invoices) for getting my expenses reimbursed, which are caused by business trips, are imported automatically into our travel expense system. Although, the Amex credit card is linked to my personal bank account. And Amex processes an automated direct debit at the end of every month for balancing all settled credit card payments, means collecting them from my bank account.

Of course, after I've claimed my travel expenses from our company, I am getting them reimbursed. But ... there is a time gap, which is somehow okay for my employer and me. In parallel, Amex gets the payment-fees from all hotels, rental car companies, and other service provider I pay with the Amex Corporate Card

The previous credit card offered the option to collect points (Lufthansa Miles & More 'Miles') with every credit card payment, as a reward program. For utilizing this option I had to pay an extra annual fee personally, means it was not paid by our company.

Now, I asked to include a similar option in my new Amex Corporate Card, for earning Amex Membership Rewards Classic points thru every credit card payment. The MR light/basic option has not been included by my employer. To get the MR Classic function I was willing to pay an extra fee of 42,00 EUR per year, which I won't get reimbursed from my employer.

This option was denied from my employer, because our company excluded it explicitly from the contract with Amex. I was told that the MR Classic function would be very costly for our company, because Amex charges high additional fees for the MR Classic option to the disadvantage of our company ... even Amex will get 42,00 EUR from every employee who likes to include this option.

Sorry, a couple of years ago I learned that credit card providers make a lot of additional profits originated from their reward programs, as long as they pass through their average administration costs - as an extra fee - to the card holder. These reward program revenues are based on commissions and kickbacks from the reward program partners, especially airlines, hotel chains, rental car companies, event companies, and online shops (that offer goods or services) to the the credit card provider, for redeeming collected points.

Only for those credit card holders, who just accumulate very little points or do not redeem their points, the credit card provider doesn't get any extra revenues (or just very small revenues) linked to the reward program, which do not cover the administration costs. In all other cases, the revenues of the credit card provider are (in many cases much) higher than these costs for offering such a reward program.

Am I wrong?

It seems to me that Amex tried to increase their profit with an extra "special charge" from our company, through providing the MR Classic option to all employees, who like to include it ... but who have to pay a personal fee directly to Amex.

Are the average administration costs for Amex ... most probably ... higher than their average MR-based extra revenues?

Many thanks in advance for your answers. By the way: I used google and I used the search function within this forum, but I couldn't find useful information in this regard - only some 'vague statements'.

Kind regards,

Jo_PS

mia

Welcome to Flyertalk.

In which country is your American Express Corporate card issued?

It is true that corporate customers (your employer) can choose whether or not to include Membership Rewards on corporate card programs. One reason an employer may not choose to allow rewards is that they do not want employees to have any incentive to spend more.

Jo_PS

Hi mia,

Thanks for your welcome.

Our company is a multinational, and I assume the corporate credit card program (now with Amex) has been agreed globally - as far as I understand our internal infomation. In my case, the Amex corporate card has been issued in Germany.

As far as I know there are no German legal or tax implications to the disadvantage of our company, for providing a reward program to the employees (that is linked to a corporate credit card) ... if every employee has to pay an extra fee for getting such an option - means for collecting "personal" points in a loyalty program through travel expenses, which are (a) caused by business trips and (b) finally paid by the employer.

It would be more complicated, if the employer would pay such an option and the employee uses defintely the corporate credit card - provided through the employer - mainly for private shopping. With Amex this wouldn't happen, because an Amex credit card isn't commonly accepted in Western Europe. Apart from that, I do have private credit cards, which are accepted almost everywhere (Visa, Master).

My question is more about the business model of a reward program like MR to the benefit of the credit card company, here Amex. Do they generate extra revenues with MR Classic in average? Or is it hard for Amex to cover the admin costs, even when getting 42,00 EUR annual fee from the card holders for the MR Classic membership?

mia

Membership Rewards generates extra revenue and profit for American Express to the extent that it causes cardholders to use the card for more frequent and larger purchases. Corporate cards are different because the employee is assumed to have no choice of which card to use.

krazykanuck

I think this is a possible reason. Or maybe the company managed to negotiate a better deal not including Membership Rewards since then Amex doesn't have the cost of issuing and redeeming the points.