American Express hits the wall

My comment……. I work for Amex. I was one of the front line people. I was a phone agent. I spoke with CM’s. Saw first hand that some CM’s think they can charge and charge and charge and not pay their bill for 3 months and still be able to use it. Amex is finally cutting down on these people. When you are late now your min amount due increases. We no longer allow CM’s not to pay for their late fee and f/c’s. I am now a trainer. I train the new phone agents. I can tell you in my 7 years of working for Amex they have tried to bend to every whim of every CM’s and their UNREALISTIC demands. Amex is finally putting their foot down. Late is Late. Overdue is Overdue.

Wow! Frank. You have been doing your homework!!!!

Amex Management are lying

In recent years, Amex has shifted its strategy from Spending to lending, yet it made a critical mistake in implementing the strategy. Traditionally, Credit card lending is very profitable, you suppose lend money to people at high enough of balance, so they could not pay the balance off each month, therefore, cardholders will revolve and carry a balance, and keep paying interests. And you also need to lend people money low enough so they don’t have to file for bankruptcy, in which case you lose too much.

From the most recent filing I from its Master Trust, http://sec.gov/Archives/edgar/data/949349/000095012308008129/y62286b2e424b2.htm#204

On page S-17, The numbers of cardholders actually delinquent are lower than any of last 5 years.

Percentage of people are delinquent are as below:
2003 .90%
2004 .82%
2005 .80%
2006 .74%
2007 .61%

As of June 30, 2008, .59%

The problems lies with the fact Amex has been too generous in giving people loans in terms of credit card loan limits.

With the average balance of over $9000 each default loan this year, they are significantly higher than in the prior years. In 2006, average loan balance per default account is around $4000-$5000.

The bottom line is very simple, Amex problem are really Amex’s problems. They gave out people too large of card limits in the last three years. Amex actually has less people paying late in term of number of people at Amex, but due to Amex’s imprudent lending standards, the people who default on their Amex loans are defaulting at a much bigger loan balances.

Truth needs to be told

This is a clearly a company-specific problem. Amex has expanded its loan portfolio too quckly in the last three years. What made worse is Amex is not like a typical card company. Amex issued cards to people with very high limits, so when they default, they default by a large dollar amounts.

Credit card business is truly wonderful business, you should lend people enough so they can’t pay off every month, yet low enough so they won’t default on you. Amex management may need to be changed

If Amex is suffering such as this, then middle-to-upper class people are suffering economically in some form. That is not a good sign at all. I fear the worst is yet to come.

AMEX is out of control. I have had a card since 1982 but no longer use it. I spend $20k per month in international travel but have found there card to be increasingly unreliable. You miss a payment by one or two days they shut your card off. Of course they still charge me 1% to 2% penalty. I cannot be on a business trip and get stranded outside the USA. In the mean time I get several solicitations per month from AMEX for additional cards. I switched to VISA.

I learned to “leave home with it” yers ago.
Good Riddance AMEX!!!!!

Of Course, when AMEX themself and the big companies going out and sending jobs to other countries where you can hardly understand the communication. This is expected.