American Express profit drops 79%

The Associated Press reported on Jan. 26 that profits for American Express dropped 79%.  The company’s net income dropped to $172 million, or 15 cents a share, from $831 million, or 71 cents a share, a year earlier. The report attributes the tremendous loss to the declining economy and a $273 million severance-related charge.

Perhaps this news is a little outdated, but it gives perspective to the portentous descent of American Express. I imagine that the recent spate of publicity generated by the NewCreditRules campaign –including a feature on Good Morning America, a link on Yahoo! News, and a weekend feature in the New York Times– will make the fall even more precipitous.  

Perhaps the company should change its name to American Depressed.       

Comments

[Rick]

Like oher comments posted, Amer Exp (Costco Card) has reduced my credit limit - no notice - with excellent credit history - all payments on time and more than minimum payments. Then Amer Exp modified their minimum payment calculator. So despite my credit balance contines to decrease, my monthly minimum payment has increased for the last two months. Customer service cannot explain, and a supervisor told me I was welcomed get another card and transfer my balance. I used to be a proud holder of an Amer Exp card, - not any longer - working very hard to secure a replacement card and will be glad to pay the transfer fee just to get rid of the Amer Exp card for good.

[curtis Ohl]

August 12, 2009
Dear Stephanie Bradley 
Executive Assistant to: 
Joel Benoliel - SVP-Legal & Administration 
Paul Latham - VP-Membership, Marketing & Services 
sabradley@costco.com
Please add our names to the growing multitudes of dissatisfaction of Costco members with American Express. As you may know through no fault of our own, American Express has unilaterally chosen to change our interest rate and reduced our credit line.
Although this reduces American Express risk it also makes American Express obsolete. If Costco stopped allowing refunds of any kind, short term gain would be very profitable but long term results would be very drastic for customer relations.
My research shows American Express has a exclusivity agreement with Costco for nearly 10 years. Please consider who this continued negative relationship will directly effect, the members of Costco.
We have stopped using our American Express Costco card as it now bares the highest interest rates among all our cards. We are among the lucky ones, we can afford to pay off our balance each month, but what American Express continues to do to Costco members is very sordid.
When we shop at Costco we now pay cash, or write checks and spend less.
As you may recall from marketing 101 when people pay cash instead of using credit they nearly always buy less and spend less. We have cut our Costco purchases by over half. We are not alone with not using our American Express Costco cards. Can Costco sustain significant less cash flow? Let us know? Please consider the future with them.
The Costco American Express rebates have little value for the continued treatment from American Express. We value our Costco membership and will continue to shop, buying less and spending less with cash.

Sincerely,

Curtis Ohl

[curtis Ohl]

August 12, 2009
Dear Stephanie Bradley 
Executive Assistant to: 
Joel Benoliel - SVP-Legal & Administration 
Paul Latham - VP-Membership, Marketing & Services 
sabradley@costco.com
Please add our names to the growing multitudes of dissatisfaction of Costco members with American Express. As you may know through no fault of our own, American Express has unilaterally chosen to change our interest rate and reduced our credit line.
Although this reduces American Express risk it also makes American Express obsolete. If Costco stopped allowing refunds of any kind, short term gain would be very profitable but long term results would be very drastic for customer relations.
My research shows American Express has a exclusivity agreement with Costco for nearly 10 years. Please consider who this continued negative relationship will directly effect, the members of Costco.
We have stopped using our American Express Costco card as it now bares the highest interest rates among all our cards. We are among the lucky ones, we can afford to pay off our balance each month, but what American Express continues to do to Costco members is very sordid.
When we shop at Costco we now pay cash, or write checks and spend less.
As you may recall from marketing 101 when people pay cash instead of using credit they nearly always buy less and spend less. We have cut our Costco purchases by over half. We are not alone with not using our American Express Costco cards. Can Costco sustain significant less cash flow? Let us know? Please consider the future with them.
The Costco American Express rebates have little value for the continued treatment from American Express. We value our Costco membership and will continue to shop, buying less and spending less with cash.

Sincerely,

Curtis Ohl

[curtis Ohl]

August 12, 2009
Dear Stephanie Bradley 
Executive Assistant to: 
Joel Benoliel - SVP-Legal & Administration 
Paul Latham - VP-Membership, Marketing & Services 
sabradley@costco.com
Please add our names to the growing multitudes of dissatisfaction of Costco members with American Express. As you may know through no fault of our own, American Express has unilaterally chosen to change our interest rate and reduced our credit line.
Although this reduces American Express risk it also makes American Express obsolete. If Costco stopped allowing refunds of any kind, short term gain would be very profitable but long term results would be very drastic for customer relations.
My research shows American Express has a exclusivity agreement with Costco for nearly 10 years. Please consider who this continued negative relationship will directly effect, the members of Costco.
We have stopped using our American Express Costco card as it now bares the highest interest rates among all our cards. We are among the lucky ones, we can afford to pay off our balance each month, but what American Express continues to do to Costco members is very sordid.
When we shop at Costco we now pay cash, or write checks and spend less.
As you may recall from marketing 101 when people pay cash instead of using credit they nearly always buy less and spend less. We have cut our Costco purchases by over half. We are not alone with not using our American Express Costco cards. Can Costco sustain significant less cash flow? Let us know? Please consider the future with them.
The Costco American Express rebates have little value for the continued treatment from American Express. We value our Costco membership and will continue to shop, buying less and spending less with cash.

Sincerely,

Curtis Ohl

[ann]

I have never carried a balance on my Costco Amex. They kept my limit the same but now charge a periodic, sneaky little note printed on the last billing, located on the side column: IMPORTANT MESSAGE ABOUT YOU ACCOUNT. Periodic rate is a finance charge on your daily balance within the billing period, do the math - the rebate is useless. They are going after those who have cash to pay their bills. Chase (formerly WAMU) is also charging periodic rates- read all terms! Credit unions are still OK.

[Mike]

I too would LIKE to shop at Costco, because other than their relationship with AMEX, they do business well in so many other respects and should be rewarded for that. I've been told that the reason why they can't "back out" of their exclusive arrangement with AMEX is due to a contract they can't break. Well here's another idea.

Call your senators and congress critter, and tell them of your situation, and how many others are feeling it too. Ask that since AMEX just switched to being a bank in order to get bailout funds, that as a condition for qualifying funds, that they immediately need to suspend/cancel any exclusivity contracts with vendors such as Costco, to "open up" the marketplace and prevent the taxpayer who's funding them from being screwed by them.

That way, once the binding contract is lifted from Costco, they can then negotiate to allow other forms of credit to be used in their stores too. Perhaps allow AMEX to still get exclusive reward points, but many of us who are seeing AMEX's current rise of fees and interest rates could give a damn now about their rewards any more. We just want a credit card we can use reliably in their stores without hassle!

[Rusty]

Thanks everyone for all the great info. We ran 16K in Costco purchases through our AMEX last year and the have cut our limit from 8K to 700 bucks! I'm payin git off and dumping the account. We've never been late, ever and they treat us like bums now. Fine, the product has not appeal for me with a 700 credit limit anyway. I suggest everyone look into a credit union. Ours has points and pays US to keep our money :)I'm done with banks.

[efren]

Sonja (Ms Stanley), i read your posting, thought i would also write off an email to Stephanie Bradley at Costco, and guess what? i received the SAME EXACT response as you did, verbatim! Costco must be getting a bunch of letters from angry customers regarding american express, but how unemotional is a pre-written response to everyone? cheers

[Sharon Barlow]

This is a conversation I just had with American Express when I called to cancel my zero balance card.

Representative: Can you tell me why you are cancelling your card?
Me: I'd rather not share that.
Representative: Okay

later during the call
Me: By the way, have you heard of a website called New Credit Rules?
Representative: Why, no I haven't. I'll do that during my break. (pause) and I think I'll tell my supervisor about it, too.
Me: I believe that you'll find it very interesting.

[Srinivas Annadi]

With respect to Sonya, At first I was curious to read message from Costco. But it doesn't seem like an easy thing, as they have been good partners for over some years and will go along for some more years to come. With that said, it is upto the customers to decide the fate of Amex/Costco.

Sincerely I threw away Amex card, and stopped shopping in Costco. I might loose a penny here(NOT REALLY SURE), but will have peace of mind and self satisfaction.

[Sonya]

BELOW IS THE RESPONSE I RECEIVED FROM COSTCO REGARDING THE AMEX CARD

Dear Ms. Stanley,

Thank you for your email regarding your dissatisfaction with American Express. I’m sorry that they have chosen to change your interest rate and credit line.

Certainly, we all recognize the credit markets are extremely challenged right now. American Express and the other major credit card issuers are all making adjustments to their card portfolios in an effort to reduce their risk. None of us at Costco can evaluate the reasonableness of each of their decisions since we don’t have access to each member’s credit profile (nor should we). We can only suggest that you contact American Express directly if you feel they have been unfair in their evaluation of your risk.

American Express has been a valuable partner with Costco for nearly 10 years and we have an exclusivity agreement with them that will continue for several more. Together Costco and American Express have worked hard to provide a no-fee credit card with a compelling rebate structure for our members.

Ultimately, only you can decide if the Costco / American Express card is of value to you. Regardless of your decision, we truly value your membership at Costco and hope that you will continue to shop with us.

Sincerely,

Stephanie Bradley
Executive Assistant to:
Joel Benoliel - SVP-Legal & Administration
Paul Latham - VP-Membership, Marketing & Services
sabradley@costco.com

[Linda]

FYI...if you call AMEX, make sure you do so from a land line. Also, ensure that they do not have your mobile/cell number. The latest revision to their Service Agreement states that YOU authorize them to make phone calls and/or send text messages, including, but not limited to account transactions or servicing, as well as OFFERS OF AMEX PRODUCTS AND SERVICES. You also agree to PAY ANY FEES or CHARGES YOU INCUR FOR THESE INCOMING CALLS OR TEXT MESSAGES from AMEX without reimbursement.

[Sonya]

Great idea about writing Costco - we'll see how long Cosco sticks with them. I am a loyal Costco customer and WILL NOT use my AMEX card there anymore. I have stopped all recurring payments to my Amex card. They had the nerve of sending me a survey for membership rewards so I sent it back to their customer service group with a nice long explanation of why I don't EVER want another survey from them and why I no longer use my card (I also included a link to this website).

[Linda]

Well...I made a late payment last year (first one since 1997) and the penalty was late fee, plus 26.99% interest for one year. As soon as my balance is paid off I am writing off AMEX altogether. Reward points and all. When I attempted to dispute, all they kept saying was...you are a valued customer! How can I be a valued customer if I can pay on time and more than the minimum for over 10 years, hit a rough spot, notify them I would pay late and be hit with such a harsh penalty. Well...it is in the Service Agreement is their answer.

[Barbie]

Here's something to think about......I agree with the enough is enough! Here's the short story....AMEX is affecting many lives! For me, I have an excellent credit history (NEVER A LATE PAYMENT, carry some balances, HAD a high credit score prior to AMEX changing the game). They keep lowering my avail limit to about $200 above what I owe. NO OTHER CARD IS DOING THIS! I have called and complained...to no success, they are VERY good at saying "I am sorry" though. So, here is what I am doing...since I only use my card at Costco, I HAVE STOPPED SHOPPING AND GETTING FUEL THERE! I am only paying my minimum balance to AMEX because there is no sense in making them a priority to pay off when my other cards (like Discover) do not shrink my available credit every time I pay. With this economy my money is more valuable in a savings account or paying a credit card that is not keeping my money available to me should I need it in case of job loss, etc.! I have also advised Costco of this problem with AMEX since they are the reason I shop with AMEX! I told them NO MORE COSTCO SHOPPING UNTIL PRESSURE IS PUT ON AMEX TO STOP AFFECTING THE LIVES OF THEIR MEMBERS. PLEASE EMAIL COSTCO THROUGH THEIR WEBSITE AND ASK FOR THEM TO PUT PRESSURE ON AMEX. COSTCO MAKES AMEX MILLIONS...HIT THEM WHERE IT HURTS!

[Robert Oliveira]

No real surprise here. The actions of AMEX seem to be synonymous with others in the industry (e.g. overlook the customer, apologize for punitive action even if you don't mean it and won't reverse it, and pull out all the stops to regain profitability). At some point, I predict that, these companies will find themselves without a good chunk of customers; the very customers they are harassing and disenfranchising through unnecessary collection practices. We are their primary profit generating mechanism, and as they piss off more and more of us I can only wonder just how long it will be before we stand up and give a collective, "enough is enough". I've already started separating myself from the likes of Bank of America, Washington Mutual/Chase, GE Money Bank and HSBC. I'm sure more will come. Best of luck to all. :O Robert.

[Curious George]

So, are you saying that the underwriters wouldn't help them out? I am confused...

[Timothyphx1]

They also paid a 18 cents per share dividend in ealy Jan-

This is expected to be the last one for a LONG time.

[Timothyphx1]

Kevin-
Read the SEC filings, then read last quarters-

Amex managed to reduce their debt by almost a billion dollars in the 4th qrt- How? By slashing credit limits and dumping accounts-

I am impressed they had a profit, however I don't expect too many quaters from them like that for awhile.

In the long run- their treatment of good customers will cost their stockholders $ (IE the US goverment)

The US bought their warrants close to $24 a share-

Great investment Uncle Sam- it's UP to $16.98 today.