American Express’ Internal Costs Reach Record High – What Does It Mean for Card Holders?

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The Platinum Card from American Express.

Learn more about The Platinum Card from American Express.

Lots of money is spent not only on American Express cards — but within AmEx itself.

In fact, a record amount of spending.

Are cardholders going to be on the hook for AmEx’s growing expenses?

“American Express Co. is learning how expensive it is to keep an airline happy,” write Bloomberg‘s Elizabeth Rembert and Jennifer Surane. They cite AmEx’s renewed deal with Delta, as “(helping) push spending on cardholder rewards to a record $2.65 billion in the second quarter, topping the $2.64 billion average of analysts’ estimates.” Those expenses reflect a 9% jump, compared with a 4% rise, notes Bharath ManjeshR for Reuters.

Ms. Rembert and Surane note that AmEx’s swipe fees climbed 6% to $6.58 billion — short of projections. And while consumer spending increased 5% to $311.7 billion(!) during Q2, even that figure was almost $6 billion short of the average estimate.

But consumers stepped in to help.

The company beat analysts’ estimates for quarterly profit, helped by stronger credit card spending, which rose 7% in the United States – the company’s biggest market – and 5% globally in the quarter.
The growth in card spending was helped by an economy that is growing steadily, but at a modest pace compared with last year, Chief Executive Officer Stephen Squeri said.
Net income rose 8.5% to $1.76 billion, or $2.07 per share. Analysts had expected a profit of $2.04 per share, according to IBES data from Refinitiv.
“Customer engagement cost has been and, I expect, will continue to grow a little faster than our revenues, and so that creates a little bit of margin compression,” Chief Financial Officer Jeffrey Campbell said on a post-earnings call with analysts.
–Bharath ManjeshR

What Does This Mean for Us Card Holders?

The growing economy combined with AmEx cardholders’ penchant for spending hopefully won’t mean any negative changes.

But I certainly hope AmEx doesn’t use the escalating costs as a reason to hike fees and/or slash benefits.

They do, after all, does have a precedent of increasing annual fees — while sometimes eliminating perks.

A collage of Delta Platinum and Delta Reserve credit cards.

AmEx’s premium annual fees are practically synonymous with the brand. The Platinum Card from American Express (learn more) jumped its annual fee from $450 to $550, but introducing new benefits such as $200 in annual Uber credit. However, they severely restricted Amex Centurion lounge access. The Business Platinum Card from American Express OPEN (learn more) pretty much said, “Hold my beer!” and increased its annual fee to $595 — while reducing several key benefits. The personal (learn more) and business (learn more) flavors of the Delta Reserve AmEx cards — while not increasing their annual fees — both reduced the number of guests cardholders could bring into Sky Clubs.

AmEx Introduces New Cards

There’s nothing like something new to generate interest — and spending.

On Thursday, AmEx rebranded the Hilton Ascend credit card, naming it the Hilton Honors American Express Surpass Card (learn more). Both the Surpass card and Hilton Honors American Express Card (learn more) were given increased welcome bonuses, as well. That same day, AmEx introduced the Blue Business Cash Card (learn more), a 2% cash back card for businesses.

Are You Worried About AmEx Raises Fees or Slashing Benefits?

What would be your breaking point if AmEx were to raise annual fees? Or did you already reach it with one (or more) of their cards?

Tell us in the Comment section below! – Chris

9 comments

  1. I already cancelled my Platinum card, citing the slashed PP benefit to the retention agent (he basically told me to get lost).

    All the banks are tightening up. It’s a result of everyone having access to this game now.

  2. @Chris – For me, with my non-Delta Amex Platinum, I can live with the $550 base fee. Uber monthly credits I use ($200). I have used most of my Saks ($100). I will use all my Delta travel credits ($200). I use a TON of “Offers for You” for HUNDREDS of dollars a year back. To get the rest of the perks of this card for net free works for me (for now).

  3. Where is your begging please sign up for my cards because I don’t have a job and need referrals so my wife doesn’t have to support my fat [redacted]

  4. @Rene, you mention $595 but that would be the business Platinum and my understanding is that it does not get Uber credits. Or, has that been added?

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