While it's legal to use credit card rewards to score great travel deals, certain practices can be problematic.
Although card issuers have established rules to limit credit card churning and attract valuable, long-term customers (think: Chase’s 5/24 Rule), much of the tension between reward travelers and big banks stems from questionable credit card use.
Each card issuer handles this differently. Take American Express, for example. If your credit card activity triggers a fraud alert, American Express may place your account under “financial review,” which can be nerve-wracking.
Let’s take a look at American Express’ financial review process to better understand what it means and how to avoid it altogether.
This article is based on the first-hand experience of several travel rewards experts, all of whom have been financially vetted by American Express. They asked to remain anonymous given the sensitivity of the topic but provided us with documents to verify their story.
What triggered the financial review of American Express?
While American Express doesn't release details of its fraud detection algorithms, one of the most common reasons for financial scrutiny appears to be a rapid increase in expenses. If you've been a cardmember for a few years and typically spend $2,000 a month on the card, and suddenly you start spending $15,000 to $20,000 a month, you may trigger an audit.
Another common and easily avoidable reason is Revolving your credit limit. Cycling means maximizing your available credit, paying off your cards and repeating the process in one statement.
One person I spoke to believed his first review came from a ride on one of his bikes. American Express Too often. The credit limit on the card was $3,000, and his monthly charges were over $50,000.
Sometimes, completely innocent behavior can result in your account being flagged. A friend of mine, let's call him “Joe,” made a $100 purchase using his cell phone. American Express® Gold Card. The purchase appears on his bill as a $100 debit.
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After returning the product for a refund, his balance became $0. This refund is equivalent to his “payment” for the month. However, because his balance dropped from $100 to $0 without a direct payment, a fraud alert was triggered. As we will see later, this was a relatively simple case and his financial review experience was not difficult.
Other interesting behaviors that have been reported to trigger financial scrutiny include bounced payments to one of your American Express cards and overuse of the “Check Spending Power” tool that comes with American Express cards.
Hundreds of people, myself included, have spent a lot of money on American Express cards and never had any problems. High spending does not guarantee scrutiny, but certain behaviors can trigger scrutiny, such as rapidly increasing spending and recycling credit line.
Related: American Express Membership Rewards: The Ultimate Guide
What is the American Express Financial Review?
For most people, the first sign that their account is under review is that it is declined during the transaction process. During the review period, your recharge permission will be suspended and you will not be able to use your Amex card. (I heard of someone getting a $1,000 credit during the review period.)
When you log into the Amex app or website, a red triangle will appear to remind you that charging is paused and direct you to dial a number.
You will also receive an email from American Express with additional information confirming that your account is under review and advising you that your account may be closed if you fail to provide the documentation requested by American Express. This is a screenshot of an email a customer received.
As you can see above, “Joe” has 14 days to contact Amex and provide all requested documentation. That's why you must handle these types of requests immediately.
What is the American Express financial review process?
Situations vary based on individual circumstances, but generally, Amex will require you to complete Form 4506-T, which authorizes the card issuer to access your IRS tax information.
I interviewed a man who had passed four financial reviews (two each for him and his wife). He explains that American Express will use the adjusted gross income from your tax return to reassess your income. Credit card application Not the income you provide.
If you report your income honestly as usual, this shouldn't cause any problems. If you do not provide timely information and your adjusted gross income is significantly lower than the income listed on your application, American Express may reduce your credit limit or close some or all of your accounts. He explains this way that the financial review process is more about income verification than anything else.
“Joe's” situation was a little easier, probably because his case was more about a system error than anything he did. American Express asked him to provide bank statements from two different banks, including the one he used to pay for his credit cards. For those concerned about privacy, the process is less invasive than letting American Express view your full tax return.
Related: Who should (and shouldn't) get the American Express Platinum Card
Do I have to comply with American Express's financial review?
Your tax returns and bank statements are very personal documents, and for a number of reasons you may not want anyone to look at them. American Express cannot force you to provide documentation during a financial review, but understand that if you do not comply, your account may be closed.
Remember, your Membership Rewards points will also be on hold during the financial review period, meaning you won’t be able to Transfer them to airline or hotel partners or redeem them via American Express Travel. This may be enough of an incentive for you to comply with American Express's requirements, as account closure will cause you to lose points.
bottom line
Sometimes, seemingly inappropriate behavior is enough to get you into trouble, so it's important to know some of the red flags that could trigger an American Express financial review. If your business's spending levels vary from one month to the next, you may not be able to avoid it, but let this serve as a reminder to always be honest about your situation. Credit card application.
If you encounter financial scrutiny, stay calm but respond quickly. American Express isn’t trying to punish you for using your travel rewards effectively; They want to make sure you can afford to repay the fees charged.
Related: How to maximize points and miles when starting a business
