Beware American Express' offer to "simplify" your finances

Remember the days when your mailbox was filled with new credit card offers? The card applications have stopped coming, and the enduring credit crunch may be bringing a message like this one from American Express to your mailbox or email inbox: "Simplify" your finances by enrolling in a plan to pay off balances on AmEx's Blue or Optima revolving cards by April 30 and you'll receive a $300 pre-paid card. Oh, and by the way, all of this will cancel your AmEx card.

It's clearly in American Express' interest to gather cash quickly from some of its more risky cardholders and close credit lines in the process. But if you were to get one of these messages, is it in your best interest to take the bait? Not really. The best thing to do is to definitely pay off any outstanding balances on your card as soon as possible but not to cancel your card. Canceling a credit card will have a negative effect on your credit rating, just as carrying large balances month to month will. That said, credit card companies have lots of sway over when to lower credit limits and cancel cards outright. So, as CreditMattersBlog.com points out, if you are getting this "invitation" from American Express, the message is pretty clear: Please go and leave your AmEx card behind.

If you do opt for the offer, read the fine print. You need to pay off balances in full by April 30 to receive the pre-paid card, and you could lose outstanding rewards points if you haven't used them before the card is officially cancelled.