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Yet such cards have little value unless merchants accept them, so American Express has been scrambling to sign up retailers. Result: the plastic once touted as chic and prestigious now pays for gas or buys cereal at the local supermarket. Based on cardholder surveys, American Express says consumers can use its cards at 92% of the places where they want to shop, vs. 72% just five years ago. But that wider acceptance has come at a price. To persuade more merchants to honor its cards, the company had to lower its discount--the bite it takes out of every purchase--from an average of 3.22% in 1990 to 2.74%. That's more attractive to retailers but still higher than charges by Visa, which says its own cut of purchases averages less than 2%.
For all their success in signing up service establishments, Golub and Chenault must still persuade members to flash their cards every day. American Express customers are already big spenders who charged an average of $6,000 on their cards in 1996, in contrast to some $3,200 for charges per Visa card. "For people who have our cards, we get a very high percentage of their spending for business purposes and for traveling and entertainment," Golub maintains. But at the same time, he concedes, "we don't get as high a percentage of their spending for personal purchases" at places such as supermarkets.
To help remedy that, American Express has been aiming ads at what Golub calls "a younger, hipper audience." The company, which spent a reported $266 million on advertising in 1996--21% more than Visa did--has been relying heavily on spots showing Jerry Seinfeld pulling out his card everywhere from the corner gas station to London fish-and-chip shops. Intended message: American Express lets its members do more with their cards. Nor is Seinfeld the only celebrated face; Amex hired golfer Tiger Woods for an estimated $30 million last spring to tout American Express Financial Advisors. He will also be a spokesman for the card abroad.
The company's most notable asset, however, could be its worldwide electronic network, which enables American Express to increase its charge volume while simultaneously holding down fraud. By slicing and dicing the data from countless points of purchase, the company can match customers and merchants and send cardholders mailings notifying them of specials at restaurants and stores that they favor. The same network enables American Express to pinpoint bad risks and bad actors before they turn into bad debt. Thus the company wrote off 6.5% of its loans in the third quarter, below the industry average of 6.7%. "To be successful at [stopping] fraud, you simply have to be better than your competitors," Golub says. That way, when fraud rings decide to strike, "they'll use somebody else's card."
Last spring the company also started getting tough with holders of its green and gold cards who don't pay up each month. Amex will now withhold incentives like frequent-flyer miles from those who do not pay on time. The company says that's only fair, because it has already advanced money to pay for purchases by tardy members.