@K-in-Boston wrote:
Sorry, I should have used increase rather than growth in my statements above. Now I'm totally confused on the numbers and what they mean, but I do have to stand by my statement that if that were referring to a percentage of cardholders in a quarter and that continued for 7 years, exactly half of all Amex cards would be a charge off. I'm still assuming the 1.8% was net charge offs and not percent of accounts?
From investopedia:
A net charge off (NCO) is the dollar amount representing the difference between gross charge-offs and any subsequent recoveries of delinquent debt. Net charge offs refer to debt owed to a company that is unlikely to be recovered by that company. This "bad debt" often written off and classified as gross charge-offs. If, at a later date, some money is recovered on the debt, the amount is subtracted from the gross charge-offs to compute the net charge-off value.
Anybody capable of translating since we all seem to be inferring this differently?
K, it is definitely net of succesfull collections; bad debt only. In this case, write off or charge off literally means that they've told the government that the money is a loss and entirely unrecoverable to offset income for tax purposes. I'll try to explain in a slightly different way, and I agree that it is quite confusing. I had to check my work a couple of times, and I work with statements like this (on a much smaller scale) on a daily basis. I didn't see the link to the WSJ article until this moment, but it leads with net charge-off rate, which would be as compared to outstanding balances, not all purchases.
I'm confident that the referenced percentage is 1.8% (note: my work shows 1.9%) of the statement balances showing on June 30th, whether past due or just posted. This is a very small percentage of Centurion Bank purchases over the time period (trailing six months.) All numbers are a percentage of dollars that customers owe to AMEX in that exact moment, and don't refer to the percentage of accounts written off nor do they represent a percentage of total card purchases.
So, brief synopsis.
Charge/write-off rate (net) - Percentage of uncollectable balances out of all outstanding balances. A snapshot metric, only valid the day of reporting.
AMEX can't collect 1.8% (or 1.9%) of all outstanding balances as reported June 30th (roughly 2.3 billion uncollectable as compared to 130 billion owed) and a vanishingly small percentage of all purchases that went through Centurion Bank cards over the time period of 1/1-6/30 (2.3 billion as compared to at least 330 trillion.) So, out of the 330 trillion in payments that AMEX forwarded to merchants, they received 330 trillion less 2.3 billion before any paid interest or fees.
Hopefully that makes more sense! If it doesn't, drop me a PM. I'll markup a copy of the financial statement and send it your way.
