Consumer Finance

American Express Adapts To Woo Budget-Mindful Consumers

American Express is rolling out new features designed to attract young, budget-conscious consumers into taking on credit card debt.

Reuters reported news that the company is launching a feature that will allow customers to separate big purchases, like furniture, medical expenses, airplane tickets or weddings, from smaller, everyday items like cups of coffee. Another feature will allow customers to immediately pay for small purchases from their bank accounts.

Under the new option, cardholders get to decide what purchases deserve interest payments and better manage their budgets in real time, said Jeff Chwast, head of Global Lending New Products and Capabilities at American Express.

As many as 10 purchases of at least $100 each can be placed into installment plans. For example, a $1,000 purchase could be covered in six monthly installments of $172.18. This would cost an additional $33.06, or $5.51 a month, in finance fees — virtually the same as the company would charge in interest for a revolving balance on the account.

Other monthly credit card spending would be interest-free as long the cardholder pays in full by the due date.

“You’ll know exactly how much you’ll be charged before you set up the plan, which is very different than a normal credit card revolve feature,” Jeff Chwast said.

The number of people under the age of 35 in the U.S. who own a credit card has dipped to the lowest point since 1989, when the Federal Reserve started collecting data on credit card ownership. Many grew up during the Great Recession and witnessed their parents lose their jobs and, in some cases, their homes. As a result, they are wary of taking on debt in the form of a credit card.

As a result, big banks such as JPMorgan Chase and Citigroup have been enhancing rewards on their credit cards and have taken market share from American Express. While Amex still has more spending on its credit cards than any other U.S. issuer, its market share fell from the prior year. It also slipped in outstanding balances, ranking fourth last year with 10.7 percent.

American Express is hoping the new features will lead more customers to use its cards and thereby increase company revenue, Chwast said.

“We believe customers will be taking out their American Express card to pay, rather than other cards,” Chwast said.

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