Get Paid To Close Your Credit Cards
One of the positive consequences of the problems that financial institutions are experiencing is that you might receive fewer offers for new lines of credit in the mail. This is because some credit companies are trying to cut costs and reducing efforts to add new cardholder in the U.S.
American Express has offered to pay a certain number of cardholders up to $300 if they will pay off card balances and close their accounts, an unprecedented move from a company who makes money on consumers carrying interest-bearing card balances. It used to be that American Express focused on wealthier Americans, happy to do business with fewer customers if those customers had a higher net worth. In more recent years, the company has expanded efforts to grow their client base among low and middle income Americans, a strategy which is coming back to haunt them now that so many people are having trouble paying their bills.
The company has not said how many cardholders received the offer or how many are expected to take advantage of it. Those who received the offer must close out their account by the end of April in order to replace their credit card with a prepaid gift card loaded with $300. Their goal is to save $1.8 billion this year and they feel that cutting ties with riskier borrowers can help them to achieve that goal. A company spokesperson said they are, “looking at different ways that we can manage credit risk based on the costumers overall credit profile.”
American Express reported that delinquencies on credit card payments increased by a larger amount than was expected in January. The company is worried that if things do indeed get worse before they get better, the losses from borrowers in default could be catastrophic for the company. Their stock is already suffering this year, losing about a third of its value in the first 7 weeks of the year. Today’s news didn’t help, as shares plunged by another 6% after news of the $300 was released.
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Tags: American Express, credit cards
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