Aug. 13 (Bloomberg) -- American Express Co. will cancel rewards points earned on some credit cards during any month that a late charge is assessed and offer to add them back for a fee.

Starting in September, New York-based AmEx will cancel points accrued in the month consumers miss a required payment on its Blue and Blue Sky cards, spokeswoman Desiree Fish said today in an e-mailed statement. Once the account is current, AmEx will charge $29 to reinstate the points for each month’s worth of rewards that a cardholder wants to recover. Points earned in previous months aren’t affected.

AmEx, the biggest U.S. credit-card issuer by purchases, cited the economy and the Credit Card Accountability Responsibility and Disclosure Act, which begins to take effect next week. The lender also is eliminating over-limit fees for consumers in response to the law President Barack Obama signed May 22. Card firms had predicted the law would drive up fees and curb rewards.

“This opens a door to adding new fees to the reward program and holding reward points hostage,” Bill Hardekopf, chief executive officer of industry newsletter LowCards.com, said in an e-mail. “If this works, others could follow and find additional ways to introduce new fees for rewards.”

AmEx has said it’s also raising rates for cash advances and increasing the late fee. The stock rose 18 cents to $31.98 as of 4:15 p.m. in New York Stock Exchange composite trading and has gained 72 percent this year, making it the best performer in the Dow Jones Industrial Average.

The point-cancellation policy is modeled after one that has been in place since 1998 for the American Express Green, Gold and Platinum charge cards, which require customers to pay bills in full each month, Fish said. The policy doesn’t apply to other credit cards beyond Blue and Sky Blue, she said.

Citigroup’s Policy

“Like all companies large and small, our pricing has to be responsive to the business and economic environment, which obviously includes the recent regulatory changes,” Fish said.

Citigroup Inc. said customers who are late on credit cards offering ThankYou Points may not be able to redeem rewards earned during the month when the accounts are overdue until they make the required payments, under a policy the New York-based bank imposed in July.

Citi doesn’t charge a reinstatement fee “and there are no plans to change that,” spokesman Samuel Wang said in an e-mail.

To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net

Last Updated: August 13, 2009 17:42 EDT