Word: optima
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...consolation in the fact that at least a few borrow-and-spenders seem to be putting off the day of reckoning. Meredith Richman, 28, a developer of computer programs in New York City, is one of them. Richman "maxed out" the $6,000 credit line on her American Express Optima card this year by charging a $3,000 income tax payment along with her rent and a $1,700 computer. "It doesn't matter, though," says Richman, who has rolled over unpaid balances to new cards three times this year. "I can always get other cards...
...into revolving credit is a gutsy move for American Express, whose recent ads have featured Jerry Seinfeld musing adenoidally about what the company has referred to in less lighthearted moments as the "evils of debt trap." AmEx's own maiden voyage into revolving credit -- with the launch of the Optima card in 1987 -- resulted in a plastic meltdown. The program quickly racked up $1.5 billion in unpaid charges, a figure twice the industry average, according to Robert McKinley, president of RAM Research Corp. Since March 1992, when the loss rate peaked at 12%, AmEx has wrestled bum credit to less...
...Optima's troubles could hardly come at a worse time for its credit-card division, which has enjoyed uninterrupted growth ever since the green card was launched 33 years ago. That all changed this year with the drastic slowdown in consumer spending and travel that was prompted by the recession and the gulf war. Charge volume, which had been growing at more than 10% annually during the past two years, is expected to decline this year...
...many things go wrong for American Express in such a short time? Analysts who follow the company say much of the same hubris and lack of managerial controls responsible for the Optima scandal may also be the cause of past disasters. The company's failed foray into cable TV, critics say, was an example of an unwise management decision to find synergy where none existed. The company may have lost sight of its limits, says analyst Daniel Murray of Argus Research. "If you invented your own private money, you might be a little arrogant...
...Optima affair, with its whiff of a cover-up, raises many unsettling questions about what top executives knew, and when. Robinson, for instance, concedes that he wasn't made aware of the problems at Optima until a month or so ago, a point that raised eyebrows throughout the industry. Says a high- ranking executive at a rival credit-card company: "I heard rumors about Optima's losses a year ago. Something's wrong when competitors knew before American Express senior executives did. If James Robinson didn't know, he should have...