AXP - American Express

[Spekulatius]

I'm not sure about the stock. But you guys have just about convinced me to get an AmEx card...

Same here. I don't think the stock is such a great value, but their service is great and they are usually great to deal with. I also agree that he cobra need Amex cards (like the Fidelity cards, which is really issued by BofA) are not quite in the same league, despite similar looking terms. I do have the Fido card as well because 2 % cash back is hard to beat. FWIW, from the Visa cards, I like the Chase Ink the best.

[gary17]

LOL!!

 

http://www.cbc.ca/news/business/modigliani-liu-yiqian-credit-card-1.3332299

[snowball82]

LOL!!

 

http://www.cbc.ca/news/business/modigliani-liu-yiqian-credit-card-1.3332299

 

Well, just curious to know the credit limit for this card ! :)

[Jurgis]

LOL!!

 

http://www.cbc.ca/news/business/modigliani-liu-yiqian-credit-card-1.3332299

 

Well, just curious to know the credit limit for this card ! :)

 

It doesn't have credit limit.

 

In fact it's not that tough to get a CC with no credit limit. However, "no credit limit" is not really true. The CC company will still block your card if it goes over some number in their system. Your people just have to call CC company and persuade them that you're good to pay gajillions so the company would raise that number up there.

 

It's a bit surprising that Christie's would eat 2%+ AmEx fee. They might have a special deal with the buyer or AmEx though.

[Spekulatius]

The traditional Amex charge card does not have a credit limit per say, but as Jurgis stated a transaction still will not get through, if Amex this that the Sum charged is out of bounds. I am pretty sure tha Christies has a special deal with Amex and that someone called Amex to make sure the transaction goes through beforehand.

 

It's great advertising for Amex, so I am pretty sure the full transaction fee is not charged in this case.

[TwoCitiesCapital]

It's great advertising for Amex, so I am pretty sure the full transaction fee is not charged in this case.

 

That's my thought. On such a large purchases, AmEx could charge a fraction of 1%, still make a ton of money, and get the free advertising for doing it. It's stuff like this also builds AmEx's allure and brand. We now have people talking about the limitless limit credit card, which has just been proven how limitless it truly is if you have the capability of paying.

[krazeenyc]

It's great advertising for Amex, so I am pretty sure the full transaction fee is not charged in this case.

 

That's my thought. On such a large purchases, AmEx could charge a fraction of 1%, still make a ton of money, and get the free advertising for doing it. It's stuff like this also builds AmEx's allure and brand. We now have people talking about the limitless limit credit card, which has just been proven how limitless it truly is if you have the capability of paying.

 

not if he is getting 1 membership reward per dollar spent.

[TwoCitiesCapital]

It's great advertising for Amex, so I am pretty sure the full transaction fee is not charged in this case.

 

That's my thought. On such a large purchases, AmEx could charge a fraction of 1%, still make a ton of money, and get the free advertising for doing it. It's stuff like this also builds AmEx's allure and brand. We now have people talking about the limitless limit credit card, which has just been proven how limitless it truly is if you have the capability of paying.

 

not if he is getting 1 membership reward per dollar spent.

 

Most membership rewards applications, outside of travel, give you about $0.005 per point. Travel applications get you closer to $0.01 per point, but I imagine that American Express has a deal with the airlines that makes it cheaper than paying the outright cost of a seat.

 

Plus, to use all of those points, this dude will literally have to travel first class almost every day, everywhere, with his entire family, for years to use all of the points that he received on this. My guess is that most of those points go unused or are used for applications that don't maximize the benefit of the points and thus minimize the cost to AmEx. If we assume that AmEx has no deals with its partners to reduce the cost to itself for driving them business, and we assume that this guy will fin d use for all 1.7M membership points, then AmEx will likely be on the hook for about $0.005 per point which means they can charge 0.5% of the transaction fee to cover that.

[krazeenyc]

It's great advertising for Amex, so I am pretty sure the full transaction fee is not charged in this case.

 

That's my thought. On such a large purchases, AmEx could charge a fraction of 1%, still make a ton of money, and get the free advertising for doing it. It's stuff like this also builds AmEx's allure and brand. We now have people talking about the limitless limit credit card, which has just been proven how limitless it truly is if you have the capability of paying.

 

not if he is getting 1 membership reward per dollar spent.

 

Most membership rewards applications, outside of travel, give you about $0.005 per point. Travel applications get you closer to $0.01 per point, but I imagine that American Express has a deal with the airlines that makes it cheaper than paying the outright cost of a seat.

 

Plus, to use all of those points, this dude will literally have to travel first class almost every day, everywhere, with his entire family, for years to use all of the points that he received on this. My guess is that most of those points go unused or are used for applications that don't maximize the benefit of the points and thus minimize the cost to AmEx. If we assume that AmEx has no deals with its partners to reduce the cost to itself for driving them business, and we assume that this guy will fin d use for all 1.7M membership points, then AmEx will likely be on the hook for about $0.005 per point which means they can charge 0.5% of the transaction fee to cover that.

 

I redeem my membership rewards points that typically get me typically 3-5 cents per pt -- generally business class and first class flights  or last minute flights that are otherwise expensive -- at least vs the quoted business/first class fares. My guess is this guy won't be buying gap gift cards with 170 million pts! What exactly amex pays the airlines for the points I'm not sure.

[TwoCitiesCapital]

It's great advertising for Amex, so I am pretty sure the full transaction fee is not charged in this case.

 

That's my thought. On such a large purchases, AmEx could charge a fraction of 1%, still make a ton of money, and get the free advertising for doing it. It's stuff like this also builds AmEx's allure and brand. We now have people talking about the limitless limit credit card, which has just been proven how limitless it truly is if you have the capability of paying.

 

not if he is getting 1 membership reward per dollar spent.

 

Most membership rewards applications, outside of travel, give you about $0.005 per point. Travel applications get you closer to $0.01 per point, but I imagine that American Express has a deal with the airlines that makes it cheaper than paying the outright cost of a seat.

 

Plus, to use all of those points, this dude will literally have to travel first class almost every day, everywhere, with his entire family, for years to use all of the points that he received on this. My guess is that most of those points go unused or are used for applications that don't maximize the benefit of the points and thus minimize the cost to AmEx. If we assume that AmEx has no deals with its partners to reduce the cost to itself for driving them business, and we assume that this guy will fin d use for all 1.7M membership points, then AmEx will likely be on the hook for about $0.005 per point which means they can charge 0.5% of the transaction fee to cover that.

 

I redeem my membership rewards points that typically get me typically 3-5 cents per pt -- generally business class and first class flights  or last minute flights that are otherwise expensive -- at least vs the quoted business/first class fares. My guess is this guy won't be buying gap gift cards with 170 million pts! What exactly amex pays the airlines for the points I'm not sure.

 

I guess that's true. The $ per points depends on the flight, time, and class. I generally get close to 0.01 per point for flying economy on weekends, but that being said, I had heard that international/first class flights get's you more points for your dollar. I imagine that AmEx isn't paying sticker price for those seats though. Also, are you using those points directly from AmEx, or are you converting them to another loyalty program first? Who bears the cost is largely determined by that.

[gary17]

I have an Amex too but they call it a "charge card" instead of a credit card. I asked what's the difference and they told me for a charge card I must pay the full amount of the bill whereas for a credit card I can chose to pay the minimum amount.  But I think even if you don't pay back the full amount of a charge card, they just charge you interest rate like any normal credit card. Lol. I still don't get it.  I do love the lounge access and the travel insurance that comes with it.  and now in Canada, it's the first payment type available on the iPhone which is another great convenience for me.

[krazeenyc]

It's great advertising for Amex, so I am pretty sure the full transaction fee is not charged in this case.

 

That's my thought. On such a large purchases, AmEx could charge a fraction of 1%, still make a ton of money, and get the free advertising for doing it. It's stuff like this also builds AmEx's allure and brand. We now have people talking about the limitless limit credit card, which has just been proven how limitless it truly is if you have the capability of paying.

 

not if he is getting 1 membership reward per dollar spent.

 

Most membership rewards applications, outside of travel, give you about $0.005 per point. Travel applications get you closer to $0.01 per point, but I imagine that American Express has a deal with the airlines that makes it cheaper than paying the outright cost of a seat.

 

Plus, to use all of those points, this dude will literally have to travel first class almost every day, everywhere, with his entire family, for years to use all of the points that he received on this. My guess is that most of those points go unused or are used for applications that don't maximize the benefit of the points and thus minimize the cost to AmEx. If we assume that AmEx has no deals with its partners to reduce the cost to itself for driving them business, and we assume that this guy will fin d use for all 1.7M membership points, then AmEx will likely be on the hook for about $0.005 per point which means they can charge 0.5% of the transaction fee to cover that.

 

I redeem my membership rewards points that typically get me typically 3-5 cents per pt -- generally business class and first class flights  or last minute flights that are otherwise expensive -- at least vs the quoted business/first class fares. My guess is this guy won't be buying gap gift cards with 170 million pts! What exactly amex pays the airlines for the points I'm not sure.

 

I guess that's true. The $ per points depends on the flight, time, and class. I generally get close to 0.01 per point for flying economy on weekends, but that being said, I had heard that international/first class flights get's you more points for your dollar. I imagine that AmEx isn't paying sticker price for those seats though. Also, are you using those points directly from AmEx, or are you converting them to another loyalty program first? Who bears the cost is largely determined by that.

 

Always converting to miles of a travel partner.  Most of the time, I'm not even flying on the airline where the membership rewards points were converted, but rather some alliance partner airline.  But knowing how to use the various miles can boost your redemption value by a lot. (This was not an amex redemption) For example last year I went to my cousin's wedding in Cincinnati using British Airways miles. The normal cost of the tickets would've been $550 pp for direct flights (oddly expensive) -- but because British Airways has (they are getting rid of the lowest tier) distance based mileage redemption it was only 9000 pts (round trip) pp -- better than 6 cents per mile redemption!

 

 

To add something Amex related to the thread -- I think the biggest threat to Amex going forward is the increased competition for the affluent (high spending) customer. For years Amex dominated this category -- and yes they are great -- a cut above for sure. But currently they are getting stiff competition from Citi and Chase, in particular, for this high end customer. I would say Amex's quality has declined ever so slightly over the years, but their competition has stepped up their game for these high value customers in a big way.

[Jurgis]

OT(?)

 

Wow I did not know about all the games people play with points/miles-conversions and buying tickets. It sounds attractive and yet sounds like a lot of effort.

 

I just get cash back at $.01 on purchase/points or gift cards at $.015-$.02 (not necessarily from AmEx).

 

International business class travel might be attractive, but I'd have to hog points for long time and there's no guarantee good conversion rate would be available by the time I want to travel... or that seats would be available for my destination... just thinking out loud.

 

Or perhaps I should just buy a Modigliani.  8)

[TwoCitiesCapital]

It's great advertising for Amex, so I am pretty sure the full transaction fee is not charged in this case.

 

That's my thought. On such a large purchases, AmEx could charge a fraction of 1%, still make a ton of money, and get the free advertising for doing it. It's stuff like this also builds AmEx's allure and brand. We now have people talking about the limitless limit credit card, which has just been proven how limitless it truly is if you have the capability of paying.

 

not if he is getting 1 membership reward per dollar spent.

 

Most membership rewards applications, outside of travel, give you about $0.005 per point. Travel applications get you closer to $0.01 per point, but I imagine that American Express has a deal with the airlines that makes it cheaper than paying the outright cost of a seat.

 

Plus, to use all of those points, this dude will literally have to travel first class almost every day, everywhere, with his entire family, for years to use all of the points that he received on this. My guess is that most of those points go unused or are used for applications that don't maximize the benefit of the points and thus minimize the cost to AmEx. If we assume that AmEx has no deals with its partners to reduce the cost to itself for driving them business, and we assume that this guy will fin d use for all 1.7M membership points, then AmEx will likely be on the hook for about $0.005 per point which means they can charge 0.5% of the transaction fee to cover that.

 

I redeem my membership rewards points that typically get me typically 3-5 cents per pt -- generally business class and first class flights  or last minute flights that are otherwise expensive -- at least vs the quoted business/first class fares. My guess is this guy won't be buying gap gift cards with 170 million pts! What exactly amex pays the airlines for the points I'm not sure.

 

I guess that's true. The $ per points depends on the flight, time, and class. I generally get close to 0.01 per point for flying economy on weekends, but that being said, I had heard that international/first class flights get's you more points for your dollar. I imagine that AmEx isn't paying sticker price for those seats though. Also, are you using those points directly from AmEx, or are you converting them to another loyalty program first? Who bears the cost is largely determined by that.

 

Always converting to miles of a travel partner.  Most of the time, I'm not even flying on the airline where the membership rewards points were converted, but rather some alliance partner airline.  But knowing how to use the various miles can boost your redemption value by a lot. (This was not an amex redemption) For example last year I went to my cousin's wedding in Cincinnati using British Airways miles. The normal cost of the tickets would've been $550 pp for direct flights (oddly expensive) -- but because British Airways has (they are getting rid of the lowest tier) distance based mileage redemption it was only 9000 pts (round trip) pp -- better than 6 cents per mile redemption!

 

 

To add something Amex related to the thread -- I think the biggest threat to Amex going forward is the increased competition for the affluent (high spending) customer. For years Amex dominated this category -- and yes they are great -- a cut above for sure. But currently they are getting stiff competition from Citi and Chase, in particular, for this high end customer. I would say Amex's quality has declined ever so slightly over the years, but their competition has stepped up their game for these high value customers in a big way.

 

I figured you were converting - that is the best way to go, but that means the cost is likely borne by the travel partner at the exchange rate they gave you for conversion and not by AmEx who still only gives you the 1 point per dollar ;) so the $0.005-$0.01 analysis still stands.

 

Also, I think they're definitely aware of the competition and are reacting to it - I imagine they'll be successful. There's more than enough room for a few "affluent" cards, but as long as AmEx retains that top spot then I wouldn't be concerned. What concerns me more is the brand dilution to that top spot by the CostCo deals, etc. They need to keep the AmEx brand exclusive. I wish they'd create another name to put the other cards under because it does tarnish the specialty of owning an AmEx if they pretty much give one to everyone now.

 

I also think they should delve more into areas outside of travel. I know that the concierge service is supposed to be able to get you event tickets, tough reservations, etc. but I'd like to see them start moving in the direction of Magnises where there are exclusive member events, networking opportunities, access to exclusive clubs without lines/bouncers, etc. I value my AmEx highly for travel, but would value it even more highly if it were able to step up my weekend entertainment as well. I'd definitely be willing to pay more for the service as well.

 

Basically, I'm looking for AmEx to optimize my experience outside of travel too. Starting with my weekends.

 

I've never owned Magnises card, but I have a friend who swears by it. It does look pretty enticing, I must say, and I'm surprised that AmEx hadn't hit on this market before. I would certainly be sold if AmEx purchased them or started a similar service. 

 

https://www.magnises.com/#network

[bennycx]

http://www.reuters.com/article/us-fidelity-banks-creditcards-idUSKBN0UI0BW20160104

 

Thoughts?

[Jurgis]

http://www.reuters.com/article/us-fidelity-banks-creditcards-idUSKBN0UI0BW20160104

 

Thoughts?

 

I have Fido Amex and use it extensively for 2% cash back. If they side-change this to Visa, I'll use Visa instead (and will be more happy with it). If they don't side-change, I'll probably hold the current card until they offer me a great deal to get the new Visa.

 

Not good news for Amex, but I don't know how much this will hurt.

[rkbabang]

http://www.reuters.com/article/us-fidelity-banks-creditcards-idUSKBN0UI0BW20160104

 

Thoughts?

 

I have Fido Amex and use it extensively for 2% cash back. If they side-change this to Visa, I'll use Visa instead (and will be more happy with it). If they don't side-change, I'll probably hold the current card until they offer me a great deal to get the new Visa.

 

Not good news for Amex, but I don't know how much this will hurt.

 

Yes I will be happy to have a Visa rather than an AmEx too.  Every time I'm somewhere which doesn't accept AmEx (happens often) I am not able to get the 2% back on my purchase and must use another card which pays only 1%.  This will be a welcome change for the card holders, I'm sure not so welcome for AXP though.

 

 

[krazeenyc]

http://www.reuters.com/article/us-fidelity-banks-creditcards-idUSKBN0UI0BW20160104

 

Thoughts?

 

I have Fido Amex and use it extensively for 2% cash back. If they side-change this to Visa, I'll use Visa instead (and will be more happy with it). If they don't side-change, I'll probably hold the current card until they offer me a great deal to get the new Visa.

 

Not good news for Amex, but I don't know how much this will hurt.

 

Yes I will be happy to have a Visa rather than an AmEx too.  Every time I'm somewhere which doesn't accept AmEx (happens often) I am not able to get the 2% back on my purchase and must use another card which pays only 1%.  This will be a welcome change for the card holders, I'm sure not so welcome for AXP though.

 

I think the ending of this relationship was largely expected. I'm in the opposite camp with you guys -- terribly disappointed that the 2% Fidelity card is no longer going to be an Amex.  .  In addition to being able to take advantage of "Amex Offers" with these cards, I also spend $36K  a year on the  Fidelity Amex  where ONLY third party bank Amex cards are accepted. So that's $720 in benefits that are no more. :-(.  Of course I can get a different 3rd party bank Amex -- but they don't offer 2%. I'm hoping the Schwab Amex will be a 2% cash back card.

[merkhet]

I'm increasingly starting to think that Visa is becoming an irrational player in this oligopoly structure.

[TwoCitiesCapital]

I'm increasingly starting to think that Visa is becoming an irrational player in this oligopoly structure.

 

Could you elaborate on that thought?

[fisch777]

I'm increasingly starting to think that Visa is becoming an irrational player in this oligopoly structure.

 

I don't know about the Fido deal.  With respect to Costco, I think Visa (very rationally) sees the deal as (very rare) opportunity to do a few things in one shot:

 

1 - Capture large and valuable portfolio of Visa cards (land grab) AND move them to "top of wallet".  As Vasant said in June, Costco is maybe the only retailer that "drives card choice" and in that sense, it is "almost issuer like".  Costco customers are generally extremely loyal, large spenders, attractive demographics (young families that spend) and arguably demand value more than average, which supports the notion that whatever Visa-branded card he/she uses for Costco will probably move "up the wallet".

 

2- Beyond the Citi-issued Costco-branded cards, EVERY Visa bank issuer now gets newly-available access to the ~$120B Costco spending pool.  While Visa's economics from a purely processing Costco transactions standpoint are probably marginal (if any), this deal helps entrench Visa as the preferred card network for said issuers (enlarging network and goodwill) and also SEE #1 ABOVE.

 

 

[bizaro86]

I think its likely Amex will lose the Starwood cobrand in 2016 as well, with the HOT/MAR merger. Marriott is the surviving entity, and they're with Chase for Visa. I think you'd get too much friction trying to move the larger Marriott cardholder base to Amex, which probably means the high spending Starwood Amex customers will get moved. Maybe they'll keep both, but I kind of doubt it.

[merkhet]

I'm increasingly starting to think that Visa is becoming an irrational player in this oligopoly structure.

 

Could you elaborate on that thought?

 

The comments on the AMEX conference calls is that Costco wanted a deal that was uneconomic for American Express. However, Visa was willing to take it. There were similar comments from Ajay Banga on the MasterCard conference call about USAA. Now, maybe that's CYA from each of them. It's certainly possible. On the other hand, maybe it's a replay of Coke & Pepsi during the dark times when they decided to go after market share at all costs.

[Peregrine]

I'm increasingly starting to think that Visa is becoming an irrational player in this oligopoly structure.

 

Could you elaborate on that thought?

 

The comments on the AMEX conference calls is that Costco wanted a deal that was uneconomic for American Express. However, Visa was willing to take it. There were similar comments from Ajay Banga on the MasterCard conference call about USAA. Now, maybe that's CYA from each of them. It's certainly possible. On the other hand, maybe it's a replay of Coke & Pepsi during the dark times when they decided to go after market share at all costs.

 

It wasn't Visa who made the decision to bid for the Costo deal, it was Citi. Some of the card-issuing companies have been irrational in bidding for fairly low return business, which has really amounted to enlarging their asset base. It's reflective of the low return environment today, especially for banks.

[TwoCitiesCapital]

I'm increasingly starting to think that Visa is becoming an irrational player in this oligopoly structure.

 

Could you elaborate on that thought?

 

The comments on the AMEX conference calls is that Costco wanted a deal that was uneconomic for American Express. However, Visa was willing to take it. There were similar comments from Ajay Banga on the MasterCard conference call about USAA. Now, maybe that's CYA from each of them. It's certainly possible. On the other hand, maybe it's a replay of Coke & Pepsi during the dark times when they decided to go after market share at all costs.

 

Thanks, wasn't aware of the USAA deal.