American Express Pays some Cardholders $300 to Close Accounts..

[KoKo]

By Hugh Son

Feb. 23 (Bloomberg) -- American Express Co., the largest U.S. credit-card company by purchases, is paying some cardholders $300 each to close accounts so the lender can reduce the risk of defaults as the recession deepens.

People who got the offer to “simplify” their finances must pay off their entire credit-card balance by April 30, according to New York-based American Express. Enrolling in the program cancels a customer’s account and may lead to forfeiture of reward points or rebates, the company said on its Web site.

Chief Executive Officer Kenneth Chenault is shedding customers as rivals reduce credit lines, raise interest rates and cut back on mail solicitations to brace for future losses. The industry’s defaults are set to break records and may reach as high as 11 percent by year-end in a stress scenario, reducing American Express’s annual profit by about 40 percent, according to Brian Foran, an analyst at Goldman Sachs Group Inc.

“This is an offer we made to select cardmembers to incent them to help pay down their balance,” said Molly Faust, an American Express spokeswoman, in a telephone interview today.

Consumers are falling behind on credit-card payments as U.S. unemployment reached 7.6 percent last month, the highest rate since 1992.

Charge-offs, or loans that American Express deemed uncollectible, rose to 8.29 percent in January from 7 percent the month earlier, while payments at least 30 days overdue climbed to 5.28 percent from 4.86 percent, the company said last week in a filing for debt packaged into securities.

California, Florida

American Express, which got $3.39 billion from the U.S. Treasury to boost capital, said last month that fourth-quarter profit from continuing operations fell 72 percent to $238 million as more consumers defaulted.

The company blamed the charge-offs on faster loan growth than competitors in the past two years and a larger customer base in California and Florida, states hard hit by the housing bust, Chief Financial Officer Dan Henry said last month.

The $300 comes on a prepaid card that can be used anywhere American Express is accepted, the company said. The promotion was reported earlier by CreditMattersBlog.com.

http://www.bloomberg.com/apps/news?pid=20601087&sid=awn.v.OUJjkE&refer=worldwide

[Donnachaidh]

1. I was always under the impression that AmEx holders weren't allowed to keep balances

When did this change? Yeah, I know it's a stupid question, but obviously I don't have an AmEx account (because I thought you had to pay the entire balance at the end of the month).

[Midlodemocrat]

2. It depends on the card.

Optima and Delta Sky Miles cards operate like revolving credit cards. Most other AmEx cards are essentially 'charge cards' in that you have to pay them off each month.

Depending on your credit worthiness and income, you might be eligible for 'Sign and Travel' or 'Pay Over Time' which allows you to carry a balance.

I think that's what they are referring to.

[Donnachaidh]

4. ahh, okay -- got it. n/t

[Clear Blue Sky]

6. Depends on the type of card.

There are many AmEx cards all with different deals. Some give points, mileage, etc. Some fee and some no fee. Some you have to pay off each month, others you don't have to.

I have a Blue card which you don't have to pay off each month. There are rewards points and no annual fee. Pretty good deal I think. And I'd be happy to accept $300 to close it.

[jtrockville]

3. So AmEx isn't offering to pay in USD, but their own credit?

Not sure I'd take their offer.

[gratuitous]

5. Oooh, an offer to "select" cardmembers!

I'm guessing that you won't see Amex print ads featuring those "select" cardmembers like they have in all the magazines with personalities like Jerry Seinfeld and Ellen DeGeneres.

[NNN0LHI]

7. Got a pre-approved offer where they gave me a $300.00 gift card to open an AmEx account last month

All I had to to was charge $500.00 on it within the first two months to qualify for the $300.00 gift card.

Weird stuff.

Don