Over the last couple of weeks, we’ve seen card issuers put additional guardrails before approving applications. Many data points indicate that you now may need to have a Chase Business Checking account open if you want Chase to approve you for a business card. Card issuers are simply responding to the current economic scenario. After Chase, is Amex the next big issuer who is going to make card approvals tougher in the short run?
Amex Card Approvals
Banks adjust their lending methods taking existing market conditions as well as future prospects into account. Although we’re seeing the easing of restrictions after Covid-19, the economic outlook still looks grim. For example, companies who received CARES funding had an obligation to keep workers employed until the end of September. Therefore, the fears of possible layoffs looming large from October seem to be driving Amex’s moves, as reported by Bloomberg.
“The question is, Where does the economy go over the next six to 12 months?” Chief Financial Officer Jeff Campbell said at a virtual investor conference on Wednesday. “Have we had the main shock of unemployment and stress on the small businesses” or, he added, “are you going to see further shocks?”
The firm has pulled back on adding new credit-card customers because it can’t get a clear picture of consumers’ financial health and employment trends. American Express itself committed to making no job cuts this year as it works through the impacts of the coronavirus pandemic, which has sapped consumer spending and forced the company to increase its loan-loss reserves.
However, Amex’s CFO was quick to point out that their cardmember retention rates have been pretty good. This doesn’t come as a surprise given how Amex did a very good job in recently revamping many of their cards in response to changing consumer spend behavior post Covid-19.
The Pundit’s Mantra
Amex recently confirmed that they now have a four card limit instead of the previous five card limit. In essence, Amex will not let you have more than four Amex credit cards. This restriction doesn’t take Amex’s charge cards into account.
Amex’s CFO’s statement doesn’t come as a surprise given the current economic conditions. However, when he says that the firm has pulled back on adding new credit card customers, it could mean two things.
Firstly, Amex is simply not going out aggressively to acquire new customers. This will help them save on marketing costs, money which they can instead spend to retain existing ones. Secondly, they’re shy about offering more credit in this market scenario. Therefore, they’re simply not offering more credit to existing customers as well. My guess is that the first assumption could possibly be what Amex’s CFO was hinting at.
What do you think about the comments by Amex’s CFO? What was your most recent Amex card application experience like? Tell us in the comments section.
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Hopefully AX will follow the advice of Warren Buffet as their biggest shareholder and protect the brand. The obvious ways to do this are through value and customer service, both of which have become more scarce of late with American Express, as they seem to prefer prioritizing spending resources on the RAT team and other customer-unfriendly initiatives.
Hi Christian,
Thanks for your comment. You make an interesting point. Amex’s initial moves seem to be aimed at protecting their employees by not instituting layoffs. I think that it’s a key component of all great brands when they put their employees and customers at the forefront of their brand.
I don’t really have an issue with their RAT team. The issue is that Amex has no clearly defined guidelines about how they define fraud. That gives their RAT team a lot of latitude in enforcing shutdowns. In a tight market, scrutiny from a lender is not unexpected, but the ambiguity in enforcement is what unnerves many.