Posted by & filed under Accounting Principles, All Articles, Financial Reporting and Analysis.

During the time that you thought the U.S. Congress was going to slowdown the generation of credit card fees, here comes another. American Express is sending out notices to customers who use co-branded credit cards with Delta Air Lines, JetBlue, Hilton Hotels, and Starwood Hotels that require a reinstatement fee. These fees will be levied in order to get back your reward points, in the event that you are late with a regular credit card payment.

QUESTIONS:

  1. The article says that by charging this fee, the company will create additional fees on future balances. Explain your understanding of how this works.
  2. Where should the transactions (both the fees and the rewards) mentioned in this article be reported in the American Express financial statements?
  3. What is a co-branded card? Explain how American Express and Delta Air Lines benefits in this arrangement.

SOURCE: Weber, H.R. “Another Credit Card Fee is About to Fly.” Knoxvillebiz.com (Retrievable online at http://www.knoxnews.com/news/2009/nov/18/another-credit-card-fee-about-fly/)

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