Why American Express Brand is valuable?

[leeway]

AMEX has an exclusive deal with COSTCO. Not sure if there are other such arrangements, but this alone could be a huge amount. I used to use mainly some 2% reward mastercards, but now those rewards gradually decreased to 1.5% to 1%, so AMEX cards  become the main charge cards for me now.

[craigatk]

AMEX has an exclusive deal with COSTCO. Not sure if there are other such arrangements, but this alone could be a huge amount. I used to use mainly some 2% reward mastercards, but now those rewards gradually decreased to 1.5% to 1%, so AMEX cards  become the main charge cards for me now.

 

I thought they ended that or was that only in Costco Canada?

[gfp]

That was only in Canada.  The Costco American Express TrueEarnings card is very popular in the United States and Amex is the only credit card accepted at US Costco locations.

 

AMEX has an exclusive deal with COSTCO. Not sure if there are other such arrangements, but this alone could be a huge amount. I used to use mainly some 2% reward mastercards, but now those rewards gradually decreased to 1.5% to 1%, so AMEX cards  become the main charge cards for me now.

 

I thought they ended that or was that only in Costco Canada?

[rkbabang]

I spent few minutes looking at the AmEx cards offered on their website.  It seems that they are oriented strongly towards people who fly a lot. I don't.  I prefer cash back.  Right now I have 3 credit cards. 

 

A Fidelity AmEx which pays 2% cash back deposited into my brokerage account. With no limit on the cash back per year. This is the card I use most often by far.

 

An Amazon.com Visa which I only use at Amazon.com, because it pays 3% cash back on Amazon purchases. 

 

And I have a Citi Master Card which I only use if I'm somewhere that doesn't accept AmEx.  It pays 2% cash back, but has a $300/year limit on the rewards.

 

None of the cards have an annual fee or give air miles or have airport privileges, but I'm not interested in any of that anyway.

[Liberty]

I spent few minutes looking at the AmEx cards offered on their website.  It seems that they are oriented strongly towards people who fly a lot. I don't.  I prefer cash back.  Right now I have 3 credit cards. 

 

A Fidelity AmEx which pays 2% cash back deposited into my brokerage account. With no limit on the cash back per year. This is the card I use most often by far.

 

An Amazon.com Visa which I only use at Amazon.com, because it pays 3% cash back on Amazon purchases. 

 

And I have a Citi Master Card which I only use if I'm somewhere that doesn't accept AmEx.  It pays 2% cash back, but has a $300/year limit on the rewards.

 

None of the cards have an annual fee or give air miles or have airport privileges, but I'm not interested in any of that anyway.

 

I also only get cashback cards. Thanks for pointing out the Amazon one. The canadian version has 2% cashback, not 3%, but I buy enough books and other stuff there that it's probably worth getting over time. There's also a 25$ gift certificate when you sign up.

[beerbaron]

I spent few minutes looking at the AmEx cards offered on their website.  It seems that they are oriented strongly towards people who fly a lot. I don't.  I prefer cash back.  Right now I have 3 credit cards. 

 

A Fidelity AmEx which pays 2% cash back deposited into my brokerage account. With no limit on the cash back per year. This is the card I use most often by far.

 

An Amazon.com Visa which I only use at Amazon.com, because it pays 3% cash back on Amazon purchases. 

 

And I have a Citi Master Card which I only use if I'm somewhere that doesn't accept AmEx.  It pays 2% cash back, but has a $300/year limit on the rewards.

 

None of the cards have an annual fee or give air miles or have airport privileges, but I'm not interested in any of that anyway.

 

I also only get cashback cards. Thanks for pointing out the Amazon one. The canadian version has 2% cashback, not 3%, but I buy enough books and other stuff there that it's probably worth getting over time. There's also a 25$ gift certificate when you sign up.

 

Chase Visa Amazon Card has 0% currency transaction fee in addition to some cash back. What you pay is the market spot price. Great for vacations!

 

BeerBaron

[Liberty]

Some stats here:

 

http://www.nerdwallet.com/blog/credit-card-data/credit-card-transaction-volume-statistics/

 

http://assets.nerdwallet.com/blog/wp-content/uploads/2012/05/transaction-volume-2006-2010.jpg

 

http://assets.nerdwallet.com/blog/wp-content/uploads/2012/05/spend-by-network-2006-20101.jpg

[treasurehunt]

I know when I get my 2% cash back on my charge card that I am free-riding off of the people who don't pay their balance every month, but I'm not sure I understand the charge card business. They provide the bonus points and service all for a $300-$500/year annual fee and never collect interest?  How does AmEx make money on the charge cards?  Float?

Actually AMEX depends less on interest income from folks not paying their balances on time than other card issuers such as the big banks. Here's some data from their latest 10-Q. Note that discount revenue -- the fees charged to merchants for the privilege of accepting the AMEX card -- is the biggest contributor to revenue. So as long as you charge a lot of stuff on your card, AMEX should be perfectly happy with you.

 

Revenues

Discount revenue 4,945

Net card fees 687

Travel commissions and fees 500

Other commissions and fees 624

Other 585

Total non-interest revenues 7,341

Interest income 1,759

Total Revenues 9,100

 

Expenses

Marketing, promotion, rewards and Card Member services 2,950

Salaries and employee benefits 1,658

Interest Expense 443

Provisions for Losses 489

Other, Net 1,248

Total Expenses 6,788

 

[rkbabang]

http://assets.nerdwallet.com/blog/wp-content/uploads/2012/05/spend-by-network-2006-20101.jpg

 

I'm actually surprised by how low these numbers are even for American Express, but especially for the more common cards.  I thought everyone used their card for almost everything the way I do, all their shopping (food, gas, etc), as many of their bills as possible (netlfix, cable, heating oil, electric, LP/NG gas, etc), and everything else they spend money on (discretionary spending, vacations, car maintenance, home maintenance, etc).  I would have expected numbers in the ball park of those amounts to be monthly not yearly.

[craigatk]

I also only get cashback cards. Thanks for pointing out the Amazon one. The canadian version has 2% cashback, not 3%, but I buy enough books and other stuff there that it's probably worth getting over time. There's also a 25$ gift certificate when you sign up.

 

Chase Visa Amazon Card has 0% currency transaction fee in addition to some cash back. What you pay is the market spot price. Great for vacations!

 

BeerBaron

 

The only reason I got this card! Was the first in Canada with this feature that I had wanted for a while. Highly recommended to save on foreign currency transactions.

[craigatk]

That was only in Canada.  The Costco American Express TrueEarnings card is very popular in the United States and Amex is the only credit card accepted at US Costco locations.

 

AMEX has an exclusive deal with COSTCO. Not sure if there are other such arrangements, but this alone could be a huge amount. I used to use mainly some 2% reward mastercards, but now those rewards gradually decreased to 1.5% to 1%, so AMEX cards  become the main charge cards for me now.

 

I thought they ended that or was that only in Costco Canada?

 

News on the radio this morning is that Costco Canada will stop accepting Amex period and that Canadian issued AMEX cards will not be accepted at US Costco locations. I'm really scratching my head on this one ... how bad was the falling out over negotiations that they canceled their exclusive Costco branded AMEX card and now are changing their preferred payment provider. Speculation is that this will open the door to an alternative credit card partner in Canada. One less reason for me to carry an AMEX card.

[Liberty]

I'm actually surprised by how low these numbers are even for American Express, but especially for the more common cards.  I thought everyone used their card for almost everything the way I do, all their shopping (food, gas, etc), as many of their bills as possible (netlfix, cable, heating oil, electric, LP/NG gas, etc), and everything else they spend money on (discretionary spending, vacations, car maintenance, home maintenance, etc).  I would have expected numbers in the ball park of those amounts to be monthly not yearly.

 

Wealthy people all think they're middle class and that everybody's like them  ;)

 

50% of American households make less than 51k a year. I bet most people with AMEXes got one because they're COSTCO members, not Netjets members...

 

http://www.census.gov/prod/2013pubs/acsbr12-02.pdf

[thepupil]

http://assets.nerdwallet.com/blog/wp-content/uploads/2012/05/spend-by-network-2006-20101.jpg

 

I'm actually surprised by how low these numbers are even for American Express, but especially for the more common cards.  I thought everyone used their card for almost everything the way I do, all their shopping (food, gas, etc), as many of their bills as possible (netlfix, cable, heating oil, electric, LP/NG gas, etc), and everything else they spend money on (discretionary spending, vacations, car maintenance, home maintenance, etc).  I would have expected numbers in the ball park of those amounts to be monthly not yearly.

 

aren't the surprisingly low numbers because they are "per card". If you have 5 AmEx's and 5 Visas and spend $20K / year evenly across the cards, would this graph show $2K / card or $10K / credit card company?

[rkbabang]

 

aren't the surprisingly low numbers because they are "per card". If you have 5 AmEx's and 5 Visas and spend $20K / year evenly across the cards, would this graph show $2K / card or $10K / credit card company?

 

Do people really hold 10 credit cards?  Why would you have more than one from each company?  I use my AmEx, unless it isn't accepted, then I use my Mastercard.  Why would I need 5 AmEx cards and 5 Mastercards(or Visa cards)?

 

Liberty's explanation makes more sense to me now that I think about it.  If you make less than $50K/year before taxes, you can't possibly spend $2K/month on your card (without quickly getting to your credit limit).

 

[gary17]

i think a lot of people likely have quite a number of visa and master cards -- probably one from the bank, one from walmart, one from sears / the bay , one from the airlines... etc. 

 

on the other hand people tend to just have 1 amex card.

 

Gary

 

 

aren't the surprisingly low numbers because they are "per card". If you have 5 AmEx's and 5 Visas and spend $20K / year evenly across the cards, would this graph show $2K / card or $10K / credit card company?

 

Do people really hold 10 credit cards?  Why would you have more than one from each company?  I use my AmEx, unless it isn't accepted, then I use my Mastercard.  Why would I need 5 AmEx cards and 5 Mastercards(or Visa cards)?

 

Liberty's explanation makes more sense to me now that I think about it.  If you make less than $50K/year before taxes, you can't possibly spend $2K/month on your card (without quickly getting to your credit limit).

[LongHaul]

This site claims average spending is $15,000 per AMEX card.  Also has some other interesting data.

 

http://www.trefis.com/stock/axp/articles/176460/analyzing-american-express-spend-centric-model-and-future-growth-potential/2013-03-29

 

Helpful comments everyone!  Great data Liberty.

[LongHaul]

The Centurion card is pretty nuts.

 

Fees for Centurion Card

"It does not offer a signup bonus, but requires a one-time initiation fee of $5,000 and a $2,500 annual fee – the highest fees of any credit card on the market."

 

Read more: http://thepointsguy.com/2014/05/is-the-amex-centurion-card-worth-the-2500-annual-fee/#ixzz3DgGtEYeT

Follow us: @thepointsguy on Twitter | thepointsguy on Facebook 

 

 

 

http://thepointsguy.com/2014/05/is-the-amex-centurion-card-worth-the-2500-annual-fee/

[Liberty]

The Centurion card is pretty nuts.

 

Fees for Centurion Card

"It does not offer a signup bonus, but requires a one-time initiation fee of $5,000 and a $2,500 annual fee – the highest fees of any credit card on the market."

 

http://thepointsguy.com/2014/05/is-the-amex-centurion-card-worth-the-2500-annual-fee/

 

This explains it:

 

https://en.wikipedia.org/wiki/Veblen_good

[Guest 50centdollars]

http://www.bnn.ca/News/2014/9/18/Costco-to-stop-accepting-AmEx-cards-in-Canada-from-January.aspx

[HJ]

http://www.bnn.ca/News/2014/9/18/Costco-to-stop-accepting-AmEx-cards-in-Canada-from-January.aspx

 

To our friends in Canada, how do you view this piece of news?  According to Wikipedia, there are 87 Costco stores in Canada.  How common is Capital One credit cards up North?  I know that a couple of years ago, Capital One did a deal with Hudson's Bay to issue their store cards.  What kind of significance do you give to this piece of news on the relevant compaines involved?  Is it fair to say this probably is more meaningful for COF than either Costco or American Express?

 

Disclosure: I am a long time COF warrant holder

[craigatk]

They are going to replace AMEX as the Costco-branded credit card that is offered/pushed on members, but Costco will accept any other mastercard too. I don't view it as that big of a deal. Most of these store credit cards are already issued by the likes of Capital One/MBNA/Chase or other American financial firms who specialize in credit cards. Most Canadians will also carry some cards issued by Canadian banks which are branded with that bank.

[sys]

Do people really hold 10 credit cards?

 

i have 12 currently.  all are held because they in some way help me maximize the number of points/miles i receive from signup bonuses and spend.

[fareastwarriors]

Do people really hold 10 credit cards?

 

i have 12 currently.  all are held because they in some way help me maximize the number of points/miles i receive from signup bonuses and spend.

 

I have like 6 now. That's down a couple already. Those sign up bonuses are very lucrative.

[rkbabang]

Do people really hold 10 credit cards?

 

i have 12 currently.  all are held because they in some way help me maximize the number of points/miles i receive from signup bonuses and spend.

 

I have like 6 now. That's down a couple already. Those sign up bonuses are very lucrative.

 

Wow, I guess I don't work as hard taking advantage of the cash back/points.  I only have 3 cards. Not counting my debit card for my checking account which has a VISA logo on it, but it isn't a credit card and provides no cash back benefits.  I only use it at ATMs to get cash, never to buy anything.  Once you are already getting 2% cash back on everything you buy the extra effort to get a few bonus points here or there doesn't seem to me to be worth the extra effort.

 

[abyli]

Do people really hold 10 credit cards?

 

i have 12 currently.  all are held because they in some way help me maximize the number of points/miles i receive from signup bonuses and spend.

 

I have like 6 now. That's down a couple already. Those sign up bonuses are very lucrative.

 

Wow, I guess I don't work as hard taking advantage of the cash back/points.  I only have 3 cards. Not counting my debit card for my checking account which has a VISA logo on it, but it isn't a credit card and provides no cash back benefits.  I only use it at ATMs to get cash, never to buy anything.  Once you are already getting 2% cash back on everything you buy the extra effort to get a few bonus points here or there doesn't seem to me to be worth the extra effort.

 

Amex Preferred Cash give you 6% back on grocery. Sallie Mae Card give you 5% on grocery(including Walmart Super Center), 5% on gas, 5% on books (including Amazon.com)...