American Express Buying Out Cardholders

One business looking for fewer customers.

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It's another sign that the average American is in for a long stretch of tighter credit: On Monday, the AP reported American Express would offer some of its members $300 in exchange for paying off their balances and closing out their accounts. 

Douglas A. McIntyre of 24/7 Wall Street says that won't be a plus for the economy:

Between the lines, that means that customers who are not likely to pay their balances are being dumped. That means more people in the economy without access to credit, which means less consumer spending.

No one expects Amex to put patriotism above profit, but as banks and credit card companies cut loose a large portion of their customer bases, the time it will take for the economy to recover will be stretched further into the future.

Also, while AmEx has been shifting its customer base toward more middle-income customers for a while, it's still widely associated with a better-heeled clientele. Makes you wonder what we're in for in the rest of the credit card space where lenders extended excess credit to a larger pool of riskier borrowers.

As for AmEx shares, last week saw several analysts downgrading their outlook for the company. Standard & Poor's kept its "sell" rating on the stock and cut its price target on the company by $3 a share to $11. UBS also lowered its target from $20 a share to $13 with a "neutral" rating, and predicted "severe earnings pressure" for the credit card sector in 2009. AmEx shares are trading at $11.57 this morning.


  • Kirk Shinkle

    Kirk Shinkle is a senior editor for U.S. News Money and manages the Best Funds portal. Follow him on Twitter @KirkS or email him at kshinkle@usnews.com.

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