AmEx to Customers: Take the Money and Run
$300 offered to close credit lines.
This phenomenon, formerly reserved for big-city landlords in New York or San Francisco, appears to be migrating to the financial industry.
According to Reuters, American Express (AXP) is offering select clients $300 to close their credit-card accounts. The company didn't disclose how many such offers it planned to send out - but did say customers will have until the end of the month to accept, and until the end of March or April to pay off their balances. In exchange, they'll receive a $300 pre-paid American Express gift card.
Rivals Capital One (COF), Discover (DFS) and JPMorgan (JPM) haven't announced similar programs, but efforts to rein in consumer credit lines are ongoing throughout the industry. The once-steady stream of new card offers that used to fill our mailboxes has finally dried up.
Besieged by higher defaults and rising delinquencies, American Express is regretting its decision a few years ago to start offering cards to customers with sketchier credit records. Once known as card company of the well-to-do, the firm expanded its offerings down the credit spectrum at just the wrong time.
Surprised by a sharp downturn in economic conditions and the new allergy to structured credit card debt, American Express has seen its stock decimated in recent months: Shares are down more than 75% from their high last year. Capital One is off a more dramatic 86% since peaking at over $63 per share last year; Discover is off a mere 72% from its high.
The relative success of the new program could have 2 noteworthy effects. First, if successful, other card companies may rush to mimic AmEx's bold initiative.
Second, consumers' willingness to voluntarily close credit lines, precisely at a time when logic would dictate a desire to keep available as much rainy-day credit as possible, provides stark evidence of the ongoing rejection of debt, credit and excess.
As consumers return to more sustainable, responsible buying patterns -- first by necessity then by choice -- purveyors of the just-not-really-necessary aren't likely to fare well.
But as is the case in a broadly deflationary environment, even purveyors of the kind of things that you stockpile in case of apocalypse are facing hard times. Campbell's Soup (CPB), for example, reported weaker-than-expected earnings and offered less-than-inspiring guidance for 2009.
Consumers, it seems, are just buying less. Of everything. Maybe closing that credit card isn't such a bad idea after all.
The information on this website solely reflects the analysis of or opin=
=3D =3D3D ion about the performance of securities and financial markets by =
the wr=3D iter=3D3D s whose articles appear on the site. The views expresse=
d by the wri=3D ters are=3D3D not necessarily the views of Minyanville Medi=
a, Inc. or members=3D of its man=3D3D agement. Nothing contained on the web=
site is intended to con=3D stitute a recom=3D3D mendation or advice address=
ed to an individual investor =3D or category of inve=3D3D stors to purchase=
, sell or hold any security, or to =3D take any action with re=3D3D spect t=
o the prospective movement of the securit=3D ies markets or to solicit t=3D=
3D he purchase or sale of any security. Any inv=3D estment decisions must b=
e made =3D3D by the reader either individually or in =3D consultation with =
his or her invest=3D3D ment professional. Minyanville write=3D rs and staff=
may trade or hold position=3D3D s in securities that are discuss=3D ed in =
articles appearing on the website. Wr=3D3D iters of articles are requir=3D =
ed to disclose whether they have a position in =3D3D any stock or fund disc=
us=3D sed in an article, but are not permitted to disclos=3D3D e the size o=
r direct=3D ion of the position. Nothing on this website is intende=3D3D d =
to solicit bus=3D iness of any kind for a writer's business or fund. Mi=
ny=3D3D anville mana=3D gement and staff as well as contributing writers wi=
ll not respo=3D3D nd to em=3D ails or other communications requesting inves=
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter