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Credit Card Applications » News » Other » American Express Card Usage Up in October

American Express Card Usage Up in October

January 16, 2010
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American Express has reason to celebrate in today's otherwise gloomy environment, reporting an increase in credit card usage during the past month, the start of this fourth quarter. It was the first time ever this year that the company saw an increase in credit use and sees it as a good sign of growing consumer or cardholder confidence. Along with jobs starting to emerge again, more and more people are spending. Going into this holiday season, credit use numbers showed an ominous start.

In a conference hosted by Bank of American, Merrill Lynch, top Executive of American Express, CEO Kenneth Chenault announced an increase of 3% in purchases charged to American Express credit cards, compared to this same period in the past year. This was also a complete turnaround from the previous months' declines, notably 5% in September, and 10% in August.

Chenault noted that this may herald the bottoming out of the economy and that things would pick up from here on forward. Credit card use has gradually improved since spring and hopefully would continue with its uphill ascent. What makes the company more hopeful aside from positive general economic trends is that the holiday season is now in full swing, with more card owners and customers shopping, taking advantage of discounts and price cuts.

Chenault also said that there have been strong signs in the economy indicating the end of economic weakness and ushering in renewed economic growth. He added that there is good reason to believe that this recessionary period in the country is nearing its end.

Consumer spending is a good indicator of economic conditions and if positive credit card use statistic of American Express is a measure of things to come, then people would be in for a prosperous holiday season with better things ahead for the next year.

Traders and investors, quick on picking up with development, lapped up stocks of the credit card company. Following Chenault's presentation, shares of the New York based lender moved up, increasing by 62 cents to $39.67.

Even if third quarter earnings were disappointing, falling by 22% compared to the same period last year, fourth quarter's start showed a lot more promise with the company expecting a normalization of purchasing behaviour as economic conditions start to improve.

Even if last quarter's cardholder spending numbers declined by 11% it was still an improvement from the second quarter's 13% dip.

Loan losses, however, improved, with a slowdown of 8.9% registered in the third quarter, better than second quarter's 10% loss rate.

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