American Express is increasing its focus on its cards with annual fees, the company announced in an investor webcast, according to Wall Street Journal's MarketWatch. The company is introducing the new fees as a way to increase its revenue.
Traditional American Express charge cards have always had annual fees, but as the company has attempted to move into new markets, some of its premium revolving credit cards will now charge one.
The company is facing a reduction in revenue as a settlement agreement it had with Visa and MasterCard is coming to an end, which means payments from the two credit card issuers will come to a halt. Expenses tied to credit card rewards programs, which has been a major focus of new customer marketing, were up about 10 percent in the fourth quarter last year. In an effort to manage the loss of revenue and increased expense, the company also announced it will slow its operating expenses this year, including salaries, benefits, occupancy and equipment.
American Express is the largest card issuer based on spending, and it has positioned itself as the card for a more affluent, older customer base, one that doesn't carry a balance from month to month. The company is now looking to reach a broader range of customers, including those who may have been turned down for the company's traditional charge cards. The MarketWatch report says about 20 percent of the company's prepaid credit card customers are people who had been previously turned down for one of AmEx's other cards. The new customers are also younger; about 55 percent of prepaid card holders are under 35.