American Express Tops for Consumer Satisfaction - Promptly Reduces Customer Credit Limits
Sep 27th, 2008 | By Rob | Category: Credit Cards
In a poll conducted in April and May of 2008, American consumers ranked American Express, the fourth largest American credit card issuer, highest in consumer satisfaction for the second year in a row according to J.D. Power and Associates.
While it may be a bit early to start placing bets on the outcome of the J.D. Power award for credit card issuers next year, I expect that American Express will not successfully defend its title next year and a new credit card king will be crowned.
American Express, according to the New York Times, is reducing the credit lines on a whopping HALF of its credit card holders. While the fact that American Express would reduce maximum credit limits on some United States consumers holding its credit cards should not surprise Credit Card Debt Law readers, since anecdotal reports of tougher borrowing standards on credit this year have been frequently reported in the mainstream media, the sheer scale of the credit cutback is staggering.
I suspect that American Express is beginning to prepare its balance sheet for the expected recession in 2009. When J.P. Morgan Chase bailed out Washington Mutual, it wrote down WaMu assets on its books based on an expectation of 7% unemployment and a further 8% nationwide fall in home prices. Given the tightening of the credit market in September and the difficulty of securitizing loans to get them off company balance sheets, this could be a bit of the type of evidence that Paulson and Bernanke are looking for that the potential Wall Street bailout plan is necessary to help Main Street American. And with increasing unemployment and declining home prices set to continue, it seems likely that further cutbacks in credit for Main Street America are coming. I just wonder whether the American Express reduction in credit limits is a one-shot deal for the customers it expects to have problems over the next year or just the opening salvo in the extension of bank deleveraging beyond corporate America.
