Fidelity Investments drops American Express, Bank of America as credit card partners

In a setback to American Express, Fidelity Investments based in the United States, announced dropping of American Express and Bank of America Corp as its credit card partners, marking the end of a 12-year partnership that delivered billions of dollars in fees to these banks.

Fidelity is based in Boston and has 24 million customers. It has roped in US Bancorp and Visa Inc as the new partners with effect from Jan.4 . The new alliance plans to provide Visa branded credit-cards to all Fidelity customers, reports Reuters.

"It's been a long, good partnership,” said Ram Subramaniam, president of Fidelity’s retail brokerage business, but declined to give any reason for ending the partnership with American Express.

Jolt for AmEx

The decision is a jolt for American Express, which is already hurt by the lost deal with retailer Costco. It had admitted that the loss of the Costco deal will injure its profits and shares are already down by 25 percent over 2015.

Since 2003, Fidelity has been offering 2 percent cash back credit cards with American Express and Bank of America's FIA Card Services. During that period Fidelity customers earned US$1.1 billion (AU$1.53 billion) in cash rewards.

Fidelity’s new alliance will offer cards with chip security technology, and digital wallets from Apple Pay, Samsung Pay and Android pay. The new card program also entails unlimited 2 percent cash back with no annual fees and no caps will apply in awarding rewards to eligible Fidelity accounts. The alliance will be issuing Fidelity Rewards Visa Signature Card and Fidelity Investments 529 College Rewards Visa Signature Card to members.

Merchant-rules

Meanwhile, a federal appeals court removed the temporary ban on American Express from pursuing its new rule that prohibits merchants accepting its cards from promoting other cards, reported The Wall Street Journal.

AmEx wanted merchants to refrain from offering discounts to customers using other cards or promoting other companies as the card of choice.

While a federal judge in February 2015 ruled AmEx’s rules as anti-competitive, a lower court slapped a stay order restraining the credit-card company from enforcing the ban, pending an appeal.

Now the new order has overturned the ban and AmEx can go ahead with its rules until a final decision is taken on the appeal. Merchants have to pay a percentage of the card transaction to card-issuing banks such as AmEx. Merchants have been complaining that they have to pay more when customers swipe an AmEx card than they use other alternative cards.

“We are encouraged by the appellate court’s order and await its decision,” American Express said in a statement.