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AmEx Offers Pay Over Time Feature to Back Small Businesses

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In a bid to provide more support to small businesses, American Express Co. (AXP - Free Report) is offering a Pay Over Time facility to the holders of Green, Gold and Platinum Business Cards. The cardholders who are basically small business owners will take advantage of this facility starting November.  The service will also be available to the new as well as the existing cardholders.

Pay Over Time is a kind of indirect credit facility offered by American Express to small businesses, most of which are currently cash starved due to the COVID-19 outbreak. This type of beyond the card solution will aid small businesses manage their working capital and cash flow needs more efficiently. With additional cash support, small businesses will be able to stock up more inventory to prepare for a busy season, order in bulk to get discounts or be able to get along smoothly while waiting to receive  a big payment.

American Express’ Pay Over Time facility provides small businessmen with the option to either carry a balance with interest on eligible purchases of $100 or more or pay the balance in full. This will give them more flexibility to opt for the payment mechanism, which is best suited per their business needs. These cards will continue to have no pre-set spending limit and will be customized according to customers’ needs. Card members will also be able to turn the Pay Over Time feature off and on again going by their convenience and requirement, thereby exercising a considerable control on the facility’s usage.

This strategic move by American Express is in response to its small-business customers’ requirement for increased payment flexibility, which has been long overdue.  Though the company provided this Pay Over Time as an opt-in feature butsmall businesses are now demanding this facility from the first day of acquiring card membership.

American Express has been a huge supporter of small business and has been promoting the entities since the past decade with its idea of Small Business Saturday, which was created on Nov 27, 2010. The campaign was launched to help small businesses gain additional exposure and change the way consumers shop within their own community during the holiday season.

Ever since, the backing of small business by American Express has intensified.  Recently, American Express committed $200 million to cushion small and micro businesses.

The company’s plans to acquire Kabbage, a leading financial technology company,  which provides a broad range of payment, cash flow and financial management tools to small businesses in the United States also resonates with its goal to promote these small-time players.

The assistance to this business group underlines the company’s own business interests as it seeks to provide more loans and other services to small businesses. With above $600 billion reserved for small business spending and a tremendous growth opportunity to boot, the company has plenty of other valid reasons to focus on this particular market. By bailing out small businesses from a crunch situation, American Express seeks to develop and expand their operations, which might require frequent loan borrowings to eventually feed the business needs.

American Express is massively hit by the COVID-19 pandemic and its most recent earnings of 29 cents per share plunged 86% year over year due to softness in spending volumes.

The company also added to its loan provisions, implying that it anticipates incurring more of bad debts in the days ahead due to deterioration in the global macroeconomic outlook as a result of the coronavirus adversity.

Other companies that also funded small businesses include PayPal Holdings, Inc. (PYPL - Free Report) , Visa Inc. (V - Free Report) and Mastercard Inc. (MA - Free Report) .

American Express currently carries a Zacks Rank #4 (Sell) and the stock has lost 17.7% year to date compared with its industry’s decline of 9.4%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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