Cardmember Receivables and Loans

6 Months Ended

Jun. 30, 2011

Cardmember Receivables and Loans [Abstract]

Cardmember Receivables and Loans

3. Cardmember Receivables and Loans

Cardmember Receivables

Cardmember receivables represent amounts due from American Express charge card payment product customers. For American Express, these cardmember receivables are recorded at the time a cardmember enters into a point-of-sale transaction with a merchant. Each charge card transaction is authorized based on its likely economics reflecting a cardmember’s most recent credit information and spend patterns. Global limits are established to limit the maximum exposure for American Express from high risk and some high spend charge cardmembers, and accounts of high risk, out of pattern charge cardmembers can be monitored even if they are current. Charge card customers generally must pay the full amount billed each month.

Credco records these cardmember receivables at the time they are purchased from TRS and certain of its subsidiaries that issue the Card (card issuers). Cardmember receivable balances are presented on the Consolidated Balance Sheets, net of reserves for losses (refer to Note 4), and typically include principal and any related accrued fees. Cardmember receivables also include participation interests purchased from an affiliate. Participation interests in cardmember receivables represent undivided interests in the cash flows of the non-interest-bearing cardmember receivables and are purchased without recourse by Credco Receivables Corporation (CRC), which is a wholly-owned subsidiary of Credco, from American Express Receivables Financing Corporation V LLC (RFC V). As of June 30, 2011 and December 31, 2010, CRC owned approximately $3.6 billion and $3.7 billion, respectively, of participation interests in cardmember receivables purchased from RFC V.

Cardmember receivables as of June 30, 2011 and December 31, 2010 consisted of:

(Millions)	2011		2010
U.S. Consumer and Small Business Services	$	3,346	$	3,497
International and Global Commercial Services(a)		9,730		8,876
Cardmember receivables, gross		13,076		12,373
Less: Cardmember receivables reserve for losses		106		112
Cardmember receivables, net(b)	$	12,970	$	12,261

(a)	International is comprised of consumer and small business services.
(b)	Cardmember receivables modified in a troubled debt restructuring (TDR) program were immaterial.

Cardmember Loans

Cardmember loans represent amounts due from customers of American Express and certain of its affiliates’ lending payment products. For American Express, these cardmember loans are recorded at the time a cardmember enters into a point-of-sale transaction with a merchant or when a charge card customer enters into an extended payment arrangement. American Express’ lending portfolios primarily include revolving loans to cardmembers obtained through either credit card accounts or the lending on charge feature of their charge card accounts. These loans have a range of terms such as credit limits, interest rates, fees and payment structures, which can be adjusted over time based on new information about cardmembers and in accordance with applicable regulations and the respective product’s terms and conditions. Cardmembers holding revolving loans are typically required to make monthly payments greater than or equal to certain pre-established amounts. The amounts that cardmembers choose to revolve are subject to finance charges. When cardmembers fall behind on their required payments, their accounts are monitored.

Credco records these cardmember loans at the time they are purchased from TRS and certain of its affiliates. Cardmember loans are presented on the Consolidated Balance Sheets, net of reserves for cardmember losses and include accrued interest and fees receivable. Credco’s policy generally is to cease accruing for interest receivable on a cardmember loan at the time the account is written off. Credco establishes reserves for interest that Credco believes will not be collected.

Cardmember loans, consisting of loans in the International card services portfolio, as of June 30, 2011 and December 31, 2010 consisted of:

(Millions)	2011		2010
Cardmember loans, gross	$	373	$	380
Less: Cardmember loans reserve for losses		6		9
Cardmember loans, net(a)	$	367	$	371

(a) There are no cardmember loans modified in a TDR program.

Cardmember Receivables and Cardmember Loans Aging

Generally, a cardmember account is considered past due if payment is not received within 30 days after the billing statement date. The following table represents the aging of cardmember receivables and cardmember loans as of June 30, 2011 and December 31, 2010:

				30-59			60-89
				Days			Days			90+ Days
2011 (Millions)	Current			Past Due			Past Due			Past Due		Total
Cardmember Receivables:
U.S. Consumer and Small Business Services	$	3,298		$	21		$	8		$	19	$	3,346
International and Global Commercial Services(a)		(b	)		(b	)		(b	)		71		9,730
Cardmember Loans:
International Card Services(c)	$	364		$	5		$	1		$	3	$	373

				30-59			60-89
				Days			Days			90+ Days
2010 (Millions)	Current			Past Due			Past Due			Past Due		Total
Cardmember Receivables:
U.S. Consumer and Small Business Services	$	3,453		$	18		$	8		$	18	$	3,497
International and Global Commercial Services(a)		(b	)		(b	)		(b	)		76		8,876
Cardmember Loans:
International Card Services(c)	$	367		$	7		$	2		$	4	$	380

(a)	For cardmember receivables in International and Global Commercial Services, delinquency data is tracked based on days past billing status rather than days past due. A cardmember account is considered 90 days past billing if payment has not been received within 90 days of the cardmember’s billing statement date. In addition, if collection procedures are initiated on an account prior to the account becoming 90 days past billing the associated cardmember receivable balance is considered as 90 days past billing. These amounts are shown above as 90+ Days Past Due for presentation purposes.
(b)	Historically, data for periods prior to 90 days past billing are not available due to system constraints. Therefore, it has not been utilized for risk management purposes. The balances that are current to 89 days past due can be derived as the difference between the Total and the 90+ Days Past Due balances.
(c)	Cardmember loans over 90 days past due continue to accrue interest.

Credit Quality Indicators for Cardmember Receivables and Cardmember Loans

The following tables present the key credit quality indicators as of or for the six months ended June 30:

	2011						2010
				30 Days						30 Days
	Net			Past Due			Net			Past Due
	Write-off			as a % of			Write-off			as a % of
	Rate		(a)	Total			Rate		(a)	Total
U.S. Consumer and Small Business Services — Cardmember Receivables		1.3	%		1.4	%		1.5	%		1.4	%
International Card Services — Cardmember Loans		0.8	%		2.5	%		2.8	%		4.3	%

2011

2010

Net Loss

90 Days

Net Loss

90 Days

Ratio as a

Past

Ratio as a

Past

% of

Billing

% of

Billing

Charge

as a % of

Charge

as a % of

Volume

(b)

Receivables

Volume

(b)

Receivables

International and Global Commercial Services — Cardmember Receivables

0.1

%

0.7

%

0.2

%

1.2

%

(a)	Credco’s write-offs, net of recoveries, represent the amount of cardmember receivables or cardmember loans owned by Credco that are written off, consisting of principal, interest and/or fees, expressed as a percentage of the average cardmember receivables or cardmember loans balances during the period.
(b)	Credco’s write-offs, net of recoveries, represent the amount of cardmember receivables owned by Credco that are written off, consisting of principal and fees, expressed as a percentage of the volume of cardmember receivables purchased by Credco during the period.

Refer to Note 4 for other factors, including external environmental factors, that management considers as part of its evaluation of reserves for losses.