American Express Co., the largest U.S. credit-card company by purchases, is paying some cardholders US$300 each to close accounts so the lender can reduce the risk of defaults as the recession deepens.
People who got the offer to “simplify” their finances must pay off their entire credit-card balance by April 30, according to New York-based American Express. Enrolling in the program cancels a customer’s account and may lead to forfeiture of reward points or rebates, the company said on its Web site.
Chief executive Kenneth Chenault is shedding customers as rivals reduce credit lines, raise interest rates and cut back on mail solicitations to brace for future losses. The industry’s defaults are set to break records and may reach as high as 11% by year-end in a stress scenario, reducing American Express’s annual profit by about 40%, according to Brian Foran, an analyst at Goldman Sachs Group Inc.
“This is an offer we made to select cardmembers to incent them to help pay down their balance,” said Molly Faust, an American Express spokeswoman, in a telephone interview Monday.