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Card holders have until the end of February to accept the offer and must close their accounts in March or April. Each card holder will receive a $300 pre-paid American Express card.
American Express, often seen as catering to relatively wealthy customers and companies, has been expanding its credit card business in recent years by reaching out to a wider range of clients.
But that strategy has backfired. The company's earnings tumbled in the fourth quarter as credit losses jumped and debt-burdened consumers slashed spending.
http://finance.yahoo.com/news/AmEx-paying-card-holders-to-rb-14442536.html
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I would never in my wildest dreams thought I'd see that headline, micharch. This confuses me. I first thought they were trying to offload the ones they feel are more likely to default on payments the rougher the economy gets. Then I read it again and it said:
"... is offering $300 to a limited number of U.S. card holders who pay off their balances and close their accounts...". Pay them off? If they can pay them off, they're not likely to be defaulters. Or do they count transferring your balance to another provider as paying it off?
I have a theory. The article said that "In addition, American Express reported last week that credit card delinquencies rose in January more than analysts expected, as U.S. unemployment increased and the global economy deteriorated."
Possibly what they're trying to do is take away cards from people who don't normally use them so they don't have the chance to build up balances on them now. Doesn't it follow that the less debt the cards are carrying, the better their numbers would look?
Say I had a credit limit of $9000 and only had $100 on my card which I use once in a blue moon. If I was the card provider, I wouldn't want you suddenly maxing out that limit within three or four months because you lost your job and were using it to tide you over in between times. If you did, you might default on that in the near future. Suddenly our company has an additional $9000 that falls into the delinquent account category that we have to report to our shareholders.
Multiply that scenario by thousands of card holders. Does it not make sense to take away your card before you can?
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I would never in my wildest dreams thought I'd see that headline, micharch. This confuses me. I first thought they were trying to offload the ones they feel are more likely to default on payments the rougher the economy gets. Then I read it again and it said:
"... is offering $300 to a limited number of U.S. card holders who pay off their balances and close their accounts...". Pay them off? If they can pay them off, they're not likely to be defaulters. Or do they count transferring your balance to another provider as paying it off?
I have a theory. The article said that "In addition, American Express reported last week that credit card delinquencies rose in January more than analysts expected, as U.S. unemployment increased and the global economy deteriorated."
Possibly what they're trying to do is take away cards from people who don't normally use them so they don't have the chance to build up balances on them now. Doesn't it follow that the less debt the cards are carrying, the better their numbers would look?
Say I had a credit limit of $9000 and only had $100 on my card which I use once in a blue moon. If I was the card provider, I wouldn't want you suddenly maxing out that limit within three or four months because you lost your job and were using it to tide you over in between times. If you did, you might default on that in the near future. Suddenly our company has an additional $9000 that falls into the delinquent account category that we have to report to our shareholders.
Multiply that scenario by thousands of card holders. Does it not make sense to take away your card before you can?
It does, greenmachine. I remembered there when I was reading your post too about something else I'll throw in for good measure. You might not remember but I posted a thread here near the end of last year about a new law that was coming in. This was my post.
It's going to take 18 months to come into effect, but new laws will prevent credit card providers from hiking the interest rates on current outstanding balances. They'll only be able to do so on new cards or new purchases/advances. The credit card companies must be spitting nails over this ruling.
I'd say that means any major purchases you're planning, you'd want to have applied to your card before July 2010 if you've got a good rate.
savingtools.com/content/good-news-credit-card-rates-its-slow-coming
Like you said,
Multiply that scenario by thousands of card holders.
I think they already have - even could have by hundreds of thousands- and came up with this because of that law. The economy's getting worse and the unemployment numbers. Cardholders can hardly pay what they owe on their cards already. By 2010 it's not going to be much different to my mind. That law's a little over a year away. Their problem then is they can't raise the rates to make up for any shortfalls the way they used to. They won't have that option to close the gap. That's what I think anyway. That's a real good reason for taking the cards away.
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It would be interesting to know exactly how many took AE up on their offer. They might have to disclose that in their next report to shareholders in the interests of transparency. $300 is very tempting for nothing but makes me think of "if it looks too good to be true, it probably is." I'd rather keep my card and have the choice there.
Greenmachine and cookie's theories add up. $300 would be loose change to a billion dollar company.
Heh. AMEX paying it's cardholders to close their accounts. And 300 dollars. Wow. Guessing they want the ship in good order before the Government comes sniffing around checking the business health of all the financial companies.