The Day After American Express -- Where To From Here? (UPDATE 1 -- Adds Citibank Offer)

Suffice it to say that I have a lot of new readers. This American Express story (link here) has been picked up by almost every major news outlet. And many of those stories led to CreditMattersBlog.com. American Express's decision to offer some customers $300 to go away has captured the attention of a lot of people. What I want to know is this: Where does the card industry go from here? Is American Express's offer an isolated event, peculiar to it -- and it alone?

During yesterday's deluge (traffic was phenomenal here yesterday), I received quite a few emails. Several emails indicated that American Express's $300 offer may be just the beginning. Indeed, one reader passed along a letter that he received from Majestic Visa. The deal goes like this: if my reader pays $1,503 or more of his balance, he'll be eligible for a credit of $27. The more he pays, the bigger the credit. Here is a copy of the letter (click for full size):


I'm also told that General Electric's Money Bank (GEMB) is offering something similar. (I have not seen a letter; if anyone has one from GEMB, please send it my way.)

UPDATE 1: In the meantime, a reader received an offer from Citibank earlier this month. The nice thing about the offer, from the customer's perspective, is that the account does not get closed. From the offer: "Pay at least $150 above the minimum amount due on any of your next 4 monthly billing statements and you'll earn a statement credit equal to 10% of the amount you paid over the minimum amount due. You can earn up to $250 in the program." So, more credit-card issuers are getting in on the action.

Here is the offer (click for full size):


To be sure, American Express is getting all of the press because it's, well, American Express. But rest assured that American Express is just moving to the head of the line. If someone is going to get paid, American Express wants to be that "someone." And it wants to be there first. But look for others to join American Express.

Credit card issuers are desperate for cash. What's more, they're worried about rising charge-off rates, which have ballooned during the past year (story link here). American Express's offer, though targeted to a specific group of customers, shows just how difficult it has become for lenders. The market for asset-backed debt -- which used to be a huge source of liquidity for the card issuers -- is terrible (see story here).

American Express has done a host of things to get its risk down. It's lowered credit limits on customers (link here), it has raised interest rates across the board (see comments section of this story), and it has conducted financial reviews and closed accounts (story here). Nothing has worked.

Now it's turning to these $300 prepaid cards. Will it work? Your guess is as good as mine. But it has to do something. Nothing else has worked. May as well give this a try. American Express, Majestic Visa, Citibank, and GEMB (allegedly) are already on board with this tactic. They're the first. I'm guessing that they won't be the last.

Stay tuned.

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