In order to slash its costs by US$ 1.8 billion in 2009, major US credit card group American Express, will lay off 7000 of its employees, amounting to around 10 per cent of its worldwide workforce.
The company is also planning to suspend management salary increases, put a freeze on new hires, slash investment spending and cut expenses for consulting, travel and entertainment.
Earlier this month, the company has reported a 24 per cent drop in third-quarter profits as cardholders cut spending.
American Express is also shrinking the credit limits and has already started notifying its card members that it will initiate a broad-based interest rate hike not a cut.
Rates of the company's credit cards are expected to go up by 2 percentage points to 3 percentage points. Turbulence in global credit and equity markets has restricted the availability of funding for consumer and small business lenders such as American Express, while rising unemployment has contributed to higher late payments and defaults on loans.
Further job cuts are likely following JP Morgan's acquisition of Washington Mutual, which has more than 43,000 employees, and at Wachovia, which had plans to cut about 5,000 mortgage jobs before being sold to Wells Fargo.
Bank of America said it would eliminate 7,500 jobs after buying Countrywide and thousands more job cuts are likely as the bank integrates its acquisition of Merrill Lynch.