AXP » Topics » Cobrand Cards

This excerpt taken from the AXP 10-K filed Mar 6, 2006.

Cobrand Cards

We issue Cards under cobrand agreements with selected commercial firms in the United States. Examples of new or enhanced cobrand products introduced in 2005 include:


    the SkyPointsSM Credit Card, a new cobranded credit card with our longtime partner, Delta Air Lines, that enables Cardmembers to earn points that can be redeemed toward discounts, in the form of a statement credit from American Express, on Delta airline tickets;


    the JetBlue® Card from American Express, a cobranded credit card with JetBlue Airways, which allows Cardmembers to earn Award Dollars convertible to points in JetBlue’s Flight Gratitude program, TrueBlue®; and


    the launch of The Knot Credit Card from American Express and The Nest Credit Card from American Express, two cobrand cards created through an alliance with The Knot, Inc., which provide rewards points, discounts and other offers for couples as they plan their weddings and begin to build their lives together.

The competition among card issuers and networks for attractive cobrand card partnerships is quite intense because they can generate high-spending loyal cardholders. The duration of our cobrand arrangements generally ranges from five to ten years. Cardmembers earn rewards provided by the partners’ respective loyalty programs based upon their spending on the cobrand cards, such as frequent flyer miles, hotel loyalty points and cash back. We make payments to our cobrand partners, which can be significant, based primarily on the amount of Cardmember spending and corresponding rewards earned on such spending and, under certain arrangements, on the number of accounts acquired and retained. We expense amounts due under cobrand arrangements in the month earned. Payment terms vary by arrangement, but are monthly or quarterly. Generally, once we make payment to the cobrand partner, as described above, the partner is solely liable for providing rewards to the Cardmember under the cobrand partner’s own loyalty program. As the issuer of the cobrand card, we retain all the credit risk with the Cardmember and bear the receivables funding and operating expenses for such cards. The cobrand partner retains the risk associated with the miles, points or other currency earned by the Cardmember under the partner’s loyalty program.



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