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Can I Use My American Express Points to Settle My American Express Card Balance?

By on October 2, 2018

Question:

Dear Steve,

I have a $19,000 balance with American Express. I also have like 500,000 points. If I settle what will happen to the points? Can they be applied against the settlement amount?

Jose

Answer:

Dear Jose,

You ask a great question.

You will need to do something with your points before you even begin to settle your American Express card. By the time your card gets to a condition where you are ready to settle you will have to be in default. When you default you lose your points. So let’s get some value out of those points before you just lose them.

American Express reward points can be used for things like:

  • Gift Cards
  • Paying for Card Charges
  • Book Travel
  • Transfer Points to Another Reward Program
  • Go Shopping

Each category of point usage has pros and cons. You might find that some combination of point categories makes the most sense for you. Not all categories are created equal. Using points to pay for balances gives you less return than purchasing a gift card. And not all gift cards give you a 1:1 return. Some only give you 70 cents for each dollar in points redeemed. Frankly, redeeming your points for absolute maximum value is almost a college course of knowledge and hours with a spreadsheet. Just find what works best for you.

Here are some of the places you can use your points to shop with.

Keep in mind that American Express can be aggressive when you default to settle. They are also quick to sue. But if you are prepared for that in advance, it can be managed. This is one of those times when having a knowledgeable professional coaching you through the process or assisting you can be very beneficial.

Be prepared to have funds on hand to settle in a lump sum. And also know that after this is all over you may never get another American Express card again. American Express doesn’t forget who settled or went bankrupt with one of their cards.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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