Reserves for Losses

12 Months Ended

Dec. 31, 2012

Reserves For Losses Cardmember Receivables And Loans Disclosure [Abstract]

Reserve for Losses

NOTE 5Reserves for Losses

Reserves for losses relating to cardmember loans and receivables represent management's best estimate of theprobable inherent losses in the Company's outstanding portfolio of loans and receivables, as of the balance sheet date. Management's evaluation process requires certain estimates and judgments.

Reserves for losses are primarily based upon statistical models that analyze portfolio performance and reflect management's judgment regarding overall reserve adequacy. The models take into account several factors, including loss migration rates and average losses and recoveries over an appropriate historical period. Management considers whether to adjust the models for specific factors such as increased risk in certain portfolios, impact of risk management initiatives on portfolio performance and concentration of credit risk based on factors such as vintage, industry or geographic regions. In addition, management may increase or decrease the reserves for losses on cardmember loans for other external environmental factors,including various indicators related to employment, spend, sentiment, housing and credit, as well as the legal and regulatory environment. Generally, due to the short-term nature of cardmember receivables, the impact of additional external factors on the probable losses inherent within the cardmember receivables portfolio is not significant. As part of this evaluation process, management also considers various reserve coverage metrics, such as reserves as a percentage of past due amounts, reserves as a percentage of cardmember receivables or loans and net write-off coverage.

Cardmemberloans and receivables balances are written off when management considers amounts to be uncollectible, which is generally determined by the number of days past due and is typically no later than 180 days. Cardmember loans and receivables in bankruptcy or owed by deceased individuals are written off upon notification andrecoveries are recognized as they are collected.

Changes in Cardmember Receivables Reserve for Losses

The following table presents changes in the cardmember receivables reserve for losses for the years ended December 31:

(Millions)				2012		2011		2010
Balance, January 1			$	438	$	386	$	546
Additions:
	Provisions(a)			601		603		439
	Other(b)			141		167		156
		Total provision		742		770		595
Deductions:
	Net write-offs(c)			(640)		(560)		(598)
	Other(d)			(112)		(158)		(157)
Balance, December 31			$	428	$	438	$	386

• Provisions for principal (resulting from authorized transactions) and fee reserve components.
• Provisions for unauthorized transactions.
• Consists of principal (resulting from authorized transactions) and fee components, less recoveries of $383 million,$349million and $357million for2012, 2011and 2010, respectively.
• Includes net write-offs resulting from unauthorized transactions of$(141) million, $(161) million and $(148) million forthe years ended December 31, 2012, 2011 and 2010,respectively; foreign currency translation adjustments of $2 million, $(2) million and $1 million for the years ended December 31, 2012, 2011 and 2010, respectively; cardmember bankruptcy reserves of $18 million, nil and nil for the years ended December 31, 2012, 2011 and 2010, respectively; and other items of $9 million, $5 million and $(10) million for the years ended December 31, 2012, 2011 and 2010, respectively. Cardmember bankruptcy reserves were classified as other liabilities in prior periods.

Cardmember Receivables Evaluated Individually and Collectively for Impairment

The following table presents cardmember receivables evaluated individually and collectively for impairment and related reserves as of December 31:

(Millions)		2012		2011		2010
Cardmember receivables evaluated
	individually for impairment(a)	$	117	$	174	$	114
Related reserves(a)		$	91	$	118	$	63
Cardmember receivables evaluated
	collectively for impairment	$	42,649	$	40,716	$	37,152
Related reserves		$	337	$	320	$	323

• Represents receivables modified in a TDR and related reserves. Refer to the Impaired Loans and Receivables discussion in Note 4 for further information.

Changes in Cardmember Loans Reserve for Losses

The following table presents changes in the cardmember loans reserve for losses for the years ended December 31:

(Millions)				2012		2011		2010
Balance, January 1			$	1,874	$	3,646	$	3,268
Reserves established for
	consolidation of a variable
		interest entity(a)		―		―		2,531
Total adjusted balance, January 1				1,874		3,646		5,799
Additions:
	Provisions(b)			1,031		145		1,445
	Other(c)			118		108		82
		Total provision		1,149		253		1,527
Deductions:
	Net write-offs
		Principal(d)		(1,280)		(1,720)		(3,260)
		Interest and fees(d)		(157)		(201)		(359)
	Other(e)			(115)		(104)		(61)
Balance, December 31			$	1,471	$	1,874	$	3,646

• Represents the establishment of cardmember reserves for losses for cardmember loans issued by the American Express Credit Account Master Trust (the Lending Trust) for the securitized loan portfolio that was consolidated under accounting guidance for consolidation of VIEs effective January 1, 2010. The establishment of the $2.5 billion reserve for losses for the securitized loan portfolio was determined by applying the same methodology as is used for the Company's unsecuritized loan portfolio. There was no incremental reserve required nor were any charge-offs recorded in conjunction with the consolidation of the Lending Trust.
• Provisions for principal (resulting from authorized transactions), interest and fee reserves components.
• Provisions for unauthorized transactions.
• Consists of principal write-offs (resulting from authorized transactions),less recoveries of $493million,$578million and $568millionfor the years ended December 2012, 2011 and 2010, respectively. Recoveries of interest and fees were de minimis.
• Includes net write-offs resulting fromunauthorized transactions of $(116) million, $(103) million and $(78) millionfor the years ended December 31, 2012, 2011 and 2010, respectively; foreign currency translation adjustments of $7 million, $(2) million and $23 millionfor the years ended December 31, 2012, 2011 and 2010, respectively; cardmember bankruptcy reserves of $4 million, nil and nil for the years ended December 31, 2012, 2011 and 2010, respectively; and other items of $(10) million, $1 million and $(6) millionfor the years ended December 31, 2012, 2011 and 2010, respectively. Cardmember bankruptcy reserves were classified as other liabilities in prior periods.

Cardmember Loans Evaluated Individually and Collectively for Impairment

The following table presents cardmember loans evaluated individually and collectively for impairment and related reserves as of December 31:

(Millions)		2012		2011		2010
Cardmember loans evaluated
	individually for impairment(a)	$	633	$	744	$	1,087
Related reserves(a)		$	153	$	176	$	279
Cardmember loans evaluated
collectively for impairment(b)		$	64,596	$	61,877	$	59,763
Related reserves(b)		$	1,318	$	1,698	$	3,367

• Represents loans modified in a TDR and related reserves. Refer to the Impaired Loans and Receivables discussion in Note 4 for further information.
• Represents current loans and loans less than 90 days past due, loans over 90 days past due and accruing interest, and non-accrual loans and related reserves. The reserves include the results of analytical models that are specific to individual pools of loans and reserves for external environmental factors that apply to loans in geographic markets that are collectively evaluated for impairment and are not specific to any individual pool of loans.