American Express Feels The Credit Crunch

As credit cards represent a huge sector of the economy in America, it comes as no surprise that this industry is feeling the same effects that consumers are experiencing when it comes to struggling with debt. Indeed, credit cards are technically debt in themselves, so the correlation would make sense, but it holds especially true when these companies have to experience delinquency and lost profits due to those who are unable to pay their bills fully or on time due to the economic slump.

American Express, one of the leading providers of credit cards in the country, has commented on this recently, stating that they believe consumers are struggling to make ends meet and are not meeting their payments fully or on time as a result. Even the more affluent citizens of the U.S. are starting to show signs of financial distress, and these consumers make up a large portion of those who deal with such companies as the credit card giant.

Of course, for the hard evidence behind their statements, you don’t have to look any farther than the shareholders. American Express stock dropped 11% in value recently during trading in the after-hours.

In regards to the general state of the company, American Express brought forth some miserable news after the market closed recently, delivering reports of weak second-quarter profits. The news was bad enough that they withdrew their 2008 earnings guidance on account of the fact that the economy has weakened significantly since they originally delivered their fiscal projections back at the beginning of the year.

The company said that the deterioration they’ve experienced was particularly harsh during June, and that while loan write-offs have managed to spike in the same month, they predict that losses incurred from bad loans will continue to rise during the last two quarters of 2008, as consumers continue to make less purchases and pay even less on their credit card statements.

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