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AmEx Troubles: Some Cardholders Can Leave Home Without It

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In this Jan. 20, 2010 file photo, American Express cards are posed for a photograph in Phoenix. Amex’s stock is down 11 percent this year, making it the second-biggest decliner on the Dow Jones industrial average. (AP Photo/Ross D. Franklin, File)

In this Jan. 20, 2010 file photo, American Express cards are posed for a photograph in Phoenix. Amex’’s stock is down 11 percent this year, making it the second-biggest decliner on the Dow Jones industrial average. (AP Photo/Ross D. Franklin, File)

KEN SWEET, AP Business Writer

NEW YORK (AP) — For decades, American Express was the undisputed credit card of choice among corporate road warriors, the wealthy and the well-traveled, who lived by the company’s slogan, “Don’t leave home without it.”

But changing consumer habits, extremely aggressive competition and increased pushback from its merchants are putting heavy pressure on AmEx.

Rivals are trying to steal away business and are succeeding in some cases. Costco, for example, is ending its 15-year relationship with AmEx and defecting to Citigroup and Visa starting next March. And airlines that used to give VIP lounge access to AmEx cardholders have been switching in recent years to other credit card companies.

Compounding its troubles, AmEx recently lost a major government antitrust lawsuit, a verdict that could damage its ability to compete.

“The competitive environment for AmEx is very challenging,” said Jason Arnold, a Wall Street analyst who covers AmEx for RBS Securities. “Major competitors have all directed their efforts to take chunks away from their business. They’ve got serious problems.”

As a result, American Express stock is down 12 percent this year. Analysts, on average, have cut their 2015 profit forecast from $6.2 billion to $5.6 billion. AmEx recently announced 4,000 layoffs, or about 6 percent of its workforce. And CEO Kenneth Chenault will face a skeptical Wall Street audience Wednesday at the company’s annual investor day.

One of the biggest threats to AmEx is the slew of competing cards aimed at the well-to-do, sometimes with lower annual fees. Card issuers have energetically courted merchants who used to accept only American Express. Merchants who once coveted AmEx’s high-net-worth cardholders are discovering they can find the same customers elsewhere.

Citigroup, in particular, has been going after AmEx’s core customer. Citigroup has hired executives away from AmEx over the past few years to help it overhaul its credit cards and revamp its loyalty program, known as ThankYou. Citi Cards CEO Jud Linville, for example, worked at AmEx for nearly 20 years.

The capture of Costco by Citigroup and Visa was the biggest blow to AmEx. The warehouse-club chain accounted for $80 billion of spending on AmEx’s network last year and 10 percent of AmEx’s cards.

“Costco was a real punch in the gut,” said David Robertson, publisher of the Nilson Report, a major trade journal for the credit card industry.

Citi also recently created a card called Citi Prestige, a high-annual-fee card aimed at AmEx Platinum Card holders.

“Citi’s ThankYou program, a year and a half ago, was pretty much worthless,” said Brian Kelly, editor in chief of thepointsguy.com, a travel and credit card rewards tracking website. “But over the past year Citi has really started to get into the game. They are not at a Chase or AmEx level yet, but based on where they have gone in a short amount of time, they’re becoming quite formidable.”

JPMorgan Chase introduced its own reward cards in 2009 with a program similar to AmEx’s. It is called Chase Ultimate Rewards.

Airport lounge access was once a perk basically guaranteed by AmEx. But American Airlines switched allegiance last year, turning over exclusive access to lounges to Citi cardholders. AmEx cardholders lost access to United Continental’s lounges in 2011 and lost the ability to transfer their points to United in 2012.

Even Discover Financial has gotten into the game. Last month, it introduced a credit card focused on building up miles that can be redeemed for travel.

AmEx hasn’t sat idle. To generate revenue, it has raised annual fees and interest rates on some products. It has also added perks for its customers, such as waiving foreign transaction fees and giving a $100 credit for incidental airline expenses for Gold Card members.

And when AmEx parted ways with United Continental, it went ahead and opened its own airport lounges. It has 13 worldwide so far, with plans to open more this year.

“American Express is still the gold standard when it comes to their rewards program, but lately it seems like all they’re doing is playing catch-up,” Kelly said.

While competitors have been moving upmarket, AmEx in response has been moving in the opposite direction. It now has two pre-paid debit cards, one of them with Wal-Mart. Pre-paid debit cards are typically aimed at low-income consumers who may not have checking accounts. The company also launched a no-annual-fee credit card last year aimed at “everyday” purchases — not the travel-heavy, corporate-expense-account business AmEx is known for.

AmEx isn’t going to let Citi walk away with its Costco card customers without a fight, either. It plans to spend aggressively to try to keep some of them because roughly 70 percent of spending on those cards was done outside the stores, according to AmEx.

“I don’t think there’s anything structurally wrong at AmEx,” said Sanjay Sakhrani, an analyst at Keefe, Bruyette & Woods. “They’re going to get in front of the revenue they are going to lose next year when the Costco relationship ends.”

Along with increased competition, AmEx is facing heavier regulatory pressure. Last month, the Justice Department won an antitrust lawsuit against American Express over its practice of making merchants sign agreements not to express a preference for one card over another.

If AmEx loses on appeal, merchants will be free to express their preferences, and that could force the company to lower the percent it charges them to process cards. That would be a drastic hit to AmEx’s bottom line, and company executives have acknowledged as much.

During the trial last summer, AmEx’s Chenault said the company would be “fighting for our survival” if it lost the case.

Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Activism

City Receives $3 Million Grant to Advance Violence Prevention Among School-Age Youth

Although the Department of Violence Prevention works to advance community outreach with life coaching, gender-based violence services, violence interruption, and community healing, this funding is focused on the family systems model, targeted specifically at Oakland Unified School District (OUSD) schools for school-site violence intervention and prevention teams.

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Guillermo Cespedes is the head of Oakland’s Dept. of Violence Prevention.
Guillermo Cespedes is the head of Oakland’s Dept. of Violence Prevention.

By Post Staff

The City of Oakland’s Department of Violence Prevention (DVP) has received a $3 million, three-year grant to support its violence interruption efforts.

In partnership with the Oakland Public Fund for Innovation, the Gilead Foundation awarded the grant to invest in health equity strategy, including a focus on prevention and intervention services to school-age youth, disrupting the pattern of violence.

“The Gilead Foundation is proud to support the Oakland Fund for Public Innovation and the City of Oakland’s Department of Violence Prevention,” said Kate Wilson, executive director of Gilead Foundation.

Chief of Violence Prevention with the City of Oakland Guillermo Cespedes said the grant will allow “DVP to strengthen families and protect its members from becoming involved in lifestyles associated with violence, while increasing educational outcomes and lifelong learning skills.”

Although the Department of Violence Prevention works to advance community outreach with life coaching, gender-based violence services, violence interruption, and community healing, this funding is focused on the family systems model, targeted specifically at Oakland Unified School District (OUSD) schools for school-site violence intervention and prevention teams.

Students who are routinely exposed to violence at home or in the community often experience toxic stress that leads to cognitive impairment, hyperactivity, and attention deficits that make it challenging to succeed in the classroom.

Exposure to violence also contributes to lower school attendance and a higher likelihood of suspension, which further promotes disengagement from school.

Using a public health approach, the DVP will strengthen family, school, and community contexts for OUSD school students living in neighborhoods with high rates of violence, to reduce their exposure to violence and increase their chances of succeeding academically.

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Bay Area

Comcast RISE Seeks Applicants from Small Businesses Owned by Women, People of Color for $10,000 Grant

Comcast RISE is part of a larger $100 million Diversity, Equity and Inclusion initiative that Comcast launched last summer. In June 2020, Comcast NBCUniversal announced the development of a comprehensive, multi-year plan to allocate $75 million in cash and $25 million in media over the next three years to fight injustice and inequality against any race, ethnicity, gender identity, sexual orientation or ability.

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Judi Townsend, owner of Mannequin Madness and Tamika Miller, owner of Cuticles Nails Spa. Both businesses are located in Oakland and have received multiple awards from the Comcast RISE program.
Judi Townsend, owner of Mannequin Madness and Tamika Miller, owner of Cuticles Nails Spa. Both businesses are located in Oakland and have received multiple awards from the Comcast RISE program.

By Adriana Arvizo

Women, regardless of their race and ethnicity, and Black, Indigenous, Hispanic and Asian American small business owners in Oakland will have the opportunity to apply for a $10,000 grant from the Comcast RISE Investment Fund, which will issue grants totaling $1 million.

Eligible businesses can apply online at www.ComcastRISE.com from Oct. 3 through Oct.16, 2022, for one of the 100 $10,000 grants.

To be eligible for the grant, businesses must:

  • Have established business operations for three or more years
  • Have one to 25 employees
  • Be based within Oakland, California city limits

The Investment Fund is coming to Oakland for the second year in a row and is an extension of Comcast RISE (Representation, Investment, Strength, and Empowerment), the multi-year, multi-faceted initiative launched in 2020 to provide small businesses owned by people of color the opportunity to apply for marketing and technology services from Comcast Business and Effectv, the advertising sales division of Comcast Cable.

If a business is not eligible for the Comcast RISE Investment Fund, applications are also open for marketing and technology services. In fact, 160 businesses in Oakland have already been selected as Comcast RISE recipients.

“The advertising campaign and technology services have allowed me to reach and service new audiences,” said Oakland resident Judi Townsend, owner of Mannequin Madness. She has benefited from the program three times, with the production and placement of a TV commercial, a technology makeover and a $10,000 grant. “The application process was easy, and I encourage my fellow eligible business owners to apply for the grant or the other benefits.”

“When we launched Comcast RISE, we knew a profound need existed in many of the communities we serve,” said John Gauder, regional senior vice president of Comcast California. “We have now seen firsthand how the program’s marketing and technology resources benefit small business owners who continue to work hard and rise above 2020’s impact.

“Today, with Oakland receiving additional funding as a Comcast RISE Investment Fund grant city, we are excited to see how this infusion of funding will continue to propel businesses to thrive,” Gauder said. “We know the impacts will be fruitful and far reaching, especially with this year’s program expansion for women-owned businesses.”

To help drive outreach and awareness about Comcast RISE and provide additional support, training and mentorship, Comcast has also awarded $50,000 to six chambers of commerce in the Oakland area. The organizations are:

  • The Oakland African American Chamber of Commerce Foundation
  • The Oakland Metropolitan Chamber of Commerce Foundation
  • The Chinatown Chamber of Commerce
  • The Latino Chamber of Commerce
  • The Vietnamese Chamber of Commerce
  • The Unity Council

Comcast RISE is part of a larger $100 million Diversity, Equity and Inclusion initiative that Comcast launched last summer. In June 2020, Comcast NBCUniversal announced the development of a comprehensive, multi-year plan to allocate $75 million in cash and $25 million in media over the next three years to fight injustice and inequality against any race, ethnicity, gender identity, sexual orientation or ability.

Grant recipients will also receive a complimentary 12-month membership to the coaching program from Ureeka, an online platform for entrepreneurs, to help them build skills, gain more customers and become financially stable.

More information and the applications to apply for either the grant program or the marketing and technology services are available at www.ComcastRISE.com.

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Activism

OPINION: Oakland Could Take More Innovative Steps to Help Solve Homelessness 

We must ensure that we are able to build sufficient housing, especially that which is affordable. Oakland is currently producing under 10% of our state Regional Housing Needs Assessment (RHNA) requirements for very low-income housing; in contrast, we have met our goals for market-rate housing.

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Janani Ramachandran is running for City Council seat for District 4. Photo courtesy of Janani Ramachandran 
Janani Ramachandran is running for City Council seat for District 4. Photo courtesy of Janani Ramachandran 

By Janani Ramachandran

First, we must conduct a comprehensive audit of where our homelessness dollars are being spent. The recent City Auditor’s report revealed $69 million was spent on homelessness services for 8,600 people over the past three years – yet at least half the participants are believed to have returned to homelessness. We must conduct a deep dive into the third-party entities receiving homelessness contracts and to what extent they use evidence-based models of homelessness reduction.

Second, we must establish a regional board across all neighboring East Bay towns because homelessness certainly crosses borders, and the financial costs of assisting our unhoused while building affordable housing should not exclusively fall on Oakland. We must develop a plan to build on land owned by cities, CalTrans, BART, EBMUD, and other public agencies. A regional strategy must also include better partnership with the Alameda County Board of Supervisors, which is primarily responsible for providing meaningful mental health and addiction services. Oakland must ensure that our residents in need are able to access the County’s supportive services, regardless of language or technological barriers, and not waste funds duplicating efforts.

Third, we must ensure that we prioritize homelessness prevention, whether tenants or homeowners, from losing their homes. The city should re-allocate some of its homelessness dollars to provide emergency vouchers to at-risk individuals, prioritizing households with children and elders.

Finally, we must ensure that we are able to build sufficient housing, especially that which is affordable. Oakland is currently producing under 10% of our state Regional Housing Needs Assessment (RHNA) requirements for very low-income housing; in contrast, we have met our goals for market-rate housing.

There’s little doubt as to why – it’s expensive. Each unit of permanent housing may cost up to $500,000 to build. The elimination of redevelopment agencies under Governor Jerry Brown was a severe blow to Oakland’s ability to build affordable housing, and we must compensate for that by ensuring developers pay their fair share.

This involves drafting an inclusionary zoning ordinance (moving away from the current tiered “in-lieu fee” system) to ensure that developers either include a percentage of affordable units in new buildings, or pay an impact fee, up front and at the start of construction, that directly funds other affordable housing projects.

But the private sector should not shoulder this burden alone – we must be more proactive in applying for competitive state and federal funds. This will require our city to streamline internal processes to help nonprofit or private developers secure local funding (which is generally the first step in applying for state and federal grants) with predictable deadlines.

Underlying all of these priorities, our policymakers must shift their perspective and recognize that those who are housing-insecure or unhoused are not a monolith. There’s no one-size-fits-all solution, but my stated priorities will hopefully begin to move us forward in the right direction.

Janani Ramachandran is a public interest attorney and former Oakland Public Ethics Commissioner running for Oakland City Council District 4.  For more informationJananiForOakland.com

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