American Express (Amex) has announced
that its US cardmembers will now be able to make monthly home
mortgage payments on Amex cards. They can already make rental
payments and condominium downpayments on their cards. The new
facility – the Express Rewards Mortgage programme – is a first for
the credit card industry, according to Amex.

Until now, mortgage lenders frowned on using credit cards to
make mortgage payments as it signalled that the cardholder was
becoming increasingly indebted. However, the Amex programme is
aimed at affluent prime consumers who are considered to be low-risk
credit customers. To be eligible for the programme, cardmembers
must qualify for and close on a participating prime loan under the
lender’s underwriting standards and must be pre-authorised by the
issuer to make the anticipated monthly payment.

A boost to card volume and spending

Housing or mortgage payment is one expenditure category in which
payment cards are under-represented, and the ability to pay
recurring mortgage payments through a payment card could
significantly boost volume and spend on the cards. Visa has made
efforts to expand card payments in the household utility bill
payment sector, but Amex is the first payment network to have
tapped into the recurring mortgage payment sector.

American Home Mortgage Corporation is the first lender to offer
the Express Rewards Mortgage programme to eligible prime home
loans. IndyMac Bank, the second-largest independent mortgage lender
in the US, will also offer the programme, which Amex says is
designed for consumers seeking a new or refinanced prime loan. Amex
cardmembers will be able to collect Membership Rewards loyalty
points under the programme.

Amex said that the programme would increase card spending by
affluent consumers who have strong credit histories, along with
uptake of the Membership Rewards programme, as the increased card
expenditure would lead to greater rewards or cashback amounts for
the cardholder. Amex said that independent research had shown that
consumers “overwhelmingly cited” monthly mortgage payments as an
ideal opportunity to use their card. In particular, the research
indicates the desire to earn rewards for mortgage payments as a key
motivating factor.

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Amex cardmembers with qualifying new purchase or refinance loans
with American Home Mortgage will pay a one-time fee of $395 to the
lender for enrolment in the Express Rewards Mortgage programme at
the time of closing. By participating in the programme, Amex said,
cardmembers would have the convenience of automatically charging
recurring monthly mortgage payments to their Amex card, decreasing
the chance of late payments. In addition, programme enrollees
receive a package of benefits including access to premium service
with a dedicated loan sales and processing group and an exclusive
set of home-related offers from Amex merchants.

“By introducing an entirely new industry to card acceptance,
American Express is providing tremendous value to our cardmembers,
issuers and our merchant partners,” said Bill Glenn, president of
Establishment Services North America and Global Merchant Network
Group at American Express. “The ability to pay recurring monthly
mortgage payments on the card, typically a consumer’s largest
monthly expense, brings unprecedented convenience and rewards to
our cardmembers. This builds on the American Express tradition of
innovation, enabling our cardmembers to use their card where and
when they want to spend in categories such as luxury apartment
rentals, private jets and corporate events.”

‘Enormous opportunity’

Joe Dickerson, an analyst at Atlantic Equities, commented: “Such
programmes would underscore Amex’s focus on increasing penetration
in spending categories where plastic is currently
under-represented. With an estimated 1 percent of payments on
plastic, housing is the least penetrated of the major spending
categories, and presents an enormous opportunity, given over $1
trillion per annum is spent on such expenditures.

“In its proprietary (ie, non bank-issued) US business, Amex has
30.1 million cardholders, who spent a total of $333 billion on
their cards in 2006. Assuming an average monthly mortgage expense
of $2,500 per month, if Amex were to penetrate just 2 percent of
these cardholders, it could lift US proprietary card billings by
$18 billion. Over the longer term, if plastic penetration of
housing payments were to reach that of, say, transportation, at 19
percent, the incremental card billings would be $172 billion (on
the 2006 cardholder base).”