Magazine article Marketing

AMEX Is out to Take Credit

Magazine article Marketing

AMEX Is out to Take Credit

Article excerpt

Amex is now testing a stand-alone credit card -- and the time is ripe.

American Express's decision to become a front-line fighter in the |pounds^30bn credit card war, with probably the world's strongest plastic card branding, will pose a serious threat to market leaders, Visa and Mastercard, in the drive for lucrative customers.

It is over five years since Amex first entered the credit card arena with Optima, offered solely to existing charge card holders. Now, for the first time, it is testing a stand-alone credit card in the UK and Canada -- using its better recognised "Green card" image.

The trial could not have come at a more competitive time, with consumers still digesting the recent GM and Ford-Barclaycard launches, and more contenders -- such as the Sunday Times -- entering the fray every week. But while many cards' identities are split between issuing bank and credit card organizations --Barclaycard/Visa, GM/Mastercard -- there's no such split for the world's best-known card.

There are other reasons why Amex's gamble is worthwhile. Interest rates are low, with banks able to borrow from the money markets at about 5.25% and lend at an average of 21%. Lucrative fees to be had from merchandisers are another source of income, as are third-party promotions.

For Amex, the move from charge cards to credit cards would seem a logical step given its strong branding in the plastic card arena.

"We intend to be very aggressive in this market," says Barry Hill, senior vice president, product development. "Our card will be positioned competitively on its APR and annual fees. We will offer a whole range of services."

During the six-month trial, those testing it will be offered a range of annual fees and interest rates -- with the APR ranging from 14.1%, just above Save & Prosper's 13.9%, which is the lowest in the market, to 17.2%, well below the 20.7% charged by Barclaycard, the market's biggest operator. Annual fees will range from a complete waiver in the first year to an annual charge of |pounds^37.50.

Mark Christopher, marketing and development manager at Save & Prosper, says he is "surprised that Amex has decided to start lending money", given its decision to withdraw the automatic overdraft once offered on the Amex Gold Card. …

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