maybe citi should send everyone $300 close their accounts now like amex is doing...wait, make that $500, it's C after all:
AmEx Pays Some Cardholders $300 to Close Accounts
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.
“What AmEx is trying to do is move to the front of the
line in terms of getting paid back” by customers who owe debts
to multiple lenders, said Michael Taiano, an analyst at Sandler
O’Neill & Partners with a “hold” rating on the company. “They
clearly grew loans faster than their competitors in the years
leading up to this financial crisis.”
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.
‘Select Cardmembers’
“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.
Faust declined to say how the company picked which customers
qualify for the offer.
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. 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.
American Express slipped 82 cents, or 6.3 percent, to
$12.15 at 4:15 p.m. in New York Stock Exchange composite
trading. The company has declined 73 percent in the past year.
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