WSJ: “AMEX has been hurt by a slowdown in cardholder spending and rising losses and delinquencies in its fast-growing lending portfolio, which allows cardholders to carry a balance. To stem the losses, AmEx has been slashing credit lines and tightening its underwriting standards to a range of customers.
The company defended its strategy to expand its credit-card business even though those customers are responsible for the bulk of its woes, saying that it hasn’t lowered underwriting standards on these newer customers. “The quality of accounts that we’ve added in recent years is as strong as our traditional card members,” Mr. Chenault said.”
The company said it wrote off 5.3% of loans during the second quarter, up from 4.3% in the first quarter and 2.9% in the second quarter of 2007.
Looks like the new customers are causing defaults. Not as many new rich people as they expected and small businesses are feeling pain.
AmEx collects an average of 2.6% of customers’ bills, vs. about 2% levied by rivals. AmEx says merchants pay higher fees to gain access to its high-end customers.
Are there merchants who only take AMEX and not Visa/MC? These 2-2.6% fees are incredibly high in this electronic market. Heard that someone like Amazon wanted to come out without new payment card that would charge 1%, but these Visa/MC guys got special training from DeBeers to essentially lock market.
