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It's also a way they can secure their loans. It's the exact same reason Capital One has bank accounts along with their credit card business (and Amex doesn't).
by lettergram 8y ago
It's also a way they can secure their loans. It's the exact same reason Capital One has bank accounts along with their credit card business (and Amex doesn't). Getting credit on the open market is expensive, by getting you to sign up with your bank account, they can leverage it to get cheaper loans for buying stocks (i.e. margin accounts). Capital One targets lower income people, so it's riskier and more vulnerable to fluctuations in market conditions. Amex in contrast, targets higher income individuals so fluctuations impact then less. This they can get away not holding bank accounts and securing credit elsewhere.
This means if there's a downturn in the market, they won't go bankrupt due to all the outstanding margin accounts (or have to do margin calls).
- RobAtticus 8y agoPerhaps true in the past, but AmEx has recently (I think?) started offering bank accounts. Their high-yield savings account is 2%, which is pretty comparable to Ally, etc. https://www.americanexpress.com/personalsavings/high-yield-savings-account.html https://www.americanexpress.com/personalsavings/high-yield-s...
- clintonb 8y agoAmerican Express Bank has been around for at least 2-3 years.
- my_usernam3 8y agoIn the world of banking, thats "started" to me.
- zrail 8y agoI believe AmEx started their savings accounts at the same time or very shortly after converting to a bank holding company during the 2008 crisis.
- snowwrestler 8y agoCommercial banks also have access to the Fed discount window, which other institutions do not. This is one reason all the big investment banks converted to bank holding companies during the financial crisis.