Membership Has Its Reward

Diane is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

I have been an American Express (NYSE: AXP) member for many years. The credit card company likes to call us members, not customers, to underscore that we are part of a select group. While I don't feel like a groupie, I do feel like a valued customer.

Over the years, I have had my share of dealings with the customer service department at American Express for the rare unknown charges and disputed charges. I have also used their price protection program, their lost or stolen feature, travel department, concierge service and much more. AmEx has an exceptional website which can handle almost any inquiry, but it's still possible and easy to get a live, English speaking stateside customer service rep on the phone. In my dealings, they have been knowledgeable, eager to help, and courteous. I can honestly say that I have never been disappointed as an American Express card-holder. That got me wondering if shareholders fare as well.

The company recently announced it is slashing some 5,400 jobs, or 8.5% of its workforce, in what amounts to the New York based entity’s biggest overhaul in a decade. The move, along with the revamping of its membership reward program and settlement of customer refunds linked to a regulatory probe, aims to make the company more “nimble, more efficient and more effective in using its resources to drive growth.” Shares rose following the report, a sign that investors and Wall Street liked the news.

American Express recovered more quickly than others in its sector after the 2008 financial crisis, thanks in part to its bevy of affluent borrowers who are quick to swipe their cards frequently and are timely in paying their bills. Even during the difficult Great Recession, a time when credit was tight and consumers were cautious with their spending, American Express gained traction.

Investment guru Warren Buffett is a big fan of AmEx. In fact, the Oracle of Omaha’s Berkshire Hathaway holds a 12.67% stake in the company, making it one of the conglomerate’s largest holdings. He explained to his diverse group of shareholders that what he admires about AmEx is its credit card and how it keeps the card special. Buffet believes that AmEx has found its niche in the credit card market, and that will keep it current and thriving.

There’s no doubt that our world is swiftly moving towards a cashless society. Holding a credit card from a company you can trust, one that is backed by stellar customer service and provides a plethora of perks, is what keeps AmEx cardholders content and loyal. Plus, American Express is one of the most recognized brands in the world, and it cards do carry some clout. 

Global competitors include behemoth players Mastercard (NYSE: MA) and Visa (NYSE: V). Both are giants in the industry and growing at leaps and bounds.  But the truth is, Mastercard and Visa compete mostly with each other, not with AmEx. AmEx holders most likely have a Mastercard, Visa card, or both, as a backup. But the same cannot be said of the latter two.

I performed an informal survey among a smattering of friends, family members, and colleagues of all ages and income levels. What I found was that most had either a Mastercard or a Visa card, in some cases both. Those who were a bit more established in their finances alleged their go-to card was their American Express Card. Furthermore, a good many had the higher tier gold and platinum cards (the ones that charge an annual fee). While no one possessed the ultimate titanium black card, I did spot one this summer, putting to rest the legend that you never actually see one.

Rumors have swirled for some time that some elite bank or brokerage firm would love to acquire American Express, but the chitchat appears to be mostly conjecture at this time. For now, American Express is streamlining and focusing on its core credit card business.

Its present mission is to reward shareholders as well as its members. Yes, American Express membership does have its reward.



DianeAlter has no position in any stocks mentioned. The Motley Fool recommends American Express and Visa. The Motley Fool owns shares of MasterCard. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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