Why American Express Does Not Offer a Secured Credit Card
There are various reasons why American Express, a premium credit card brand, does not offer secured credit cards. First and foremost, understanding the history of American Express helps to provide context for their current credit card offerings.
Origins of American Express
Jeremy Dear, co-founder of Hiya, explains that American Express first began as a form of payment that did not require credit. In the early days, an AmEx card was presented to a merchant, who then submitted the charge slip to American Express. American Express would pay the merchant 98% of the transaction amount and aggregated all charges for the month. The customer was then required to pay the full amount by the end of the month, without accruing any interest, as there was no credit line involved.
Evolution of American Express
Over time, American Express evolved to include more traditional credit card services, such as revolving credit and interest-bearing options. However, these offerings are not as extensive as those provided by other major credit card companies. According to Sean Valentine, a finance expert and American Express advocate, the company is more focused on premium services and remains cautious about expanding into lower-end markets like secured credit cards.
Why American Express Avoids Secured Credit Cards
Secured credit cards appeal to individuals with poor credit histories or those who are new to the credit system. However, American Express does not offer such products due to their brand positioning and business model. As a premium brand, American Express generates revenue primarily from merchants who accept their cards. Offering a low-end, secured credit card would not align with their current market positioning and could dilute the value of their brand.
Risk vs. Revenue
Fintech expert Sarah Brophy notes that American Express is not interested in entering the subprime lending market. Subprime financing, which involves lending to individuals with lower credit scores or weaker financial profiles, typically features higher interest rates and lower credit limits. The nature of secured credit cards aligns closely with this business model, which means that American Express would not want to support a product or service that goes against their financial risk management practices.
Conclusion
In summary, American Express does not offer a secured credit card because of their current business model and brand positioning. As a premium card provider, they prefer to maintain their high-end reputation and avoid entering the lower-end, high-risk market. The company focuses on offering premium services to their target audience rather than expanding into new segments that may not align with their long-term goals. This approach ensures that American Express continues to provide high-quality, value-added services to their customer base.