December 14, 2004
Citigroup, the largest credit card company in the world, has signed on to issue American Express cards, the second major card issuer to do so since the Supreme Court declined to hear an appeal from MasterCard and Visa. MBNA issued its first Amex cards last month.
The new cards will bear both Citibank and American Express logos and will be introduced in late 2005, the companies said.
MasterCard and Visa for years have prohibited their member banks from working with other brands, like American Express and Discover. But in October, the Supreme Court let stand a lower court decision that struck down the rules, opening the door to new business arrangements that proponents say will be beneficial to consumers.
The CitiBank and MBNA deals give American Express access to about one fourth of the U.S. credit card market, putting it in a good position to steal business from its rivals. American Express is expected to offer lower interest rates, at least initially, and to promote its supposedly superior customer service and awards programs.
The American Express card is also thought to appeal to big spenders, whose pockets the banks are always eager to pluck.
American Express, meanwhile, is suing a number of other banks, including Chase, Capital One, Bank of America, Wells Fargo and J.P. Morgan, for monetary damages. The suit also names Visa and MasterCard.
Merchants are unlikely to be gleeful about the shifting alliances. American Express typically charges merchants higher interchange fees than Visa, MasterCard and Discover to process credit-card transactions. This also makes banks happy since they get a slice of the fee.
