American Express Credit 10-Q 2007 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____ to ____

Commission File No. 1-6908

AMERICAN EXPRESS CREDIT CORPORATION
(Exact name of registrant as specified in its charter)

Delaware	11-1988350
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
One Christina Centre, 301 North Walnut Street
Suite 1002, Wilmington, Delaware	19801-2919
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number including area code:(302) 594-3350

None

(Former name, former address and former fiscal year, if changed since last report.)

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND HAS THEREFORE OMITTED CERTAIN ITEMS FROM THIS REPORT IN ACCORDANCE WITH THE REDUCED DISCLOSURE FORMAT PERMITTED UNDER GENERAL INSTRUCTIONS H(2).

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  X    No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ___                     Accelerated filer___                    Non-accelerated filer  X  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ___ No  X  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at August 6, 2007
Common Stock (par value $.10 per share)	1,054,938 Shares

AMERICAN EXPRESS CREDIT CORPORATION


FORM 10-Q


INDEX

			Page No.
PART I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Consolidated Statements of Income and Retained
		Earnings – Three and six months ended June 30, 2007
		and 2006	3
		Consolidated Balance Sheets –
		June 30, 2007 and December 31, 2006	4
		Consolidated Statements of Cash Flows –
		Six months ended June 30, 2007 and 2006	5
		Notes to Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis
		of Financial Condition and Results
		of Operations	9
	Item 4.	Controls and Procedures	15
PART II.	OTHER INFORMATION
	Item 6.	Exhibits	16
		Signatures	17
		Exhibit Index	E-1

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AMERICAN EXPRESS CREDIT CORPORATION

PART I.   FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME
AND RETAINED EARNINGS
(Millions)
(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
		2007			2006			2007			2006
Revenues
Discount revenue earned from purchased
cardmember receivables and loans	$	691		$	506		$	1,353		$	968
Interest income from affiliates		155			124			303			240
Interest income from investments		63			48			130			97
Finance charge revenue		13			11			25			24
Other		1			-			5			4
Total revenues		923			689			1,816			1,333
Expenses
Provision for losses, net of recoveries(1)		154			73			314			215
Interest expense		392			322			771			602
Interest expense to affiliates		102			72			215			147
Service fees to affiliates		47			23			92			23
Other		1			-			2			3
Total expenses		696			490			1,394			990
Pretax income		227			199			422			343
Income tax provision		26			32			49			50
Net income		201			167			373			293
Dividends		(150	)		(100	)		(300	)		(100	)
Adoption of FIN 48		-			-			(15	)		-
Retained earnings at beginning of period		3,209			3,206			3,202			3,080
Retained earnings at end of period	$	3,260		$	3,273		$	3,260		$	3,273

See Notes to Consolidated Financial Statements.

(1)    Provision for losses are shown net of recoveries of $43 million and $37 million for the three months ended June 30, 2007 and 2006, respectively, and $89 million and $87 million for the six months ended June 30, 2007 and 2006, respectively.

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AMERICAN EXPRESS CREDIT CORPORATION

CONSOLIDATED BALANCE SHEETS
(Millions, except share data)
(Unaudited)

	June 30,			December 31,
	2007			2006
Assets
Cash and cash equivalents	$	1,922		$	737
Investment securities		1,789			2,299
Investment securities restricted		1,211			716
Cardmember receivables, less reserves: 2007, $752; 2006, $739		26,827			26,854
Cardmember loans, less reserves: 2007, $9; 2006, $10		357			346
Loans with affiliates		10,178			9,691
Deferred charges and other assets		343			313
Due from affiliates		103			7
Total assets	$	42,730		$	40,963
Liabilities and Shareholder’s Equity
Short-term debt	$	8,001		$	5,883
Short-term debt with affiliates		7,941			9,586
Long-term debt		22,819			21,790
Total debt		38,761			37,259
Accrued interest and other liabilities		427			285
Total liabilities		39,188			37,544
Shareholder’s Equity
Common stock, $.10 par value, authorized 3 million shares;
issued and outstanding 1.5 million shares		1			1
Capital surplus		161			161
Retained earnings		3,260			3,202
Accumulated other comprehensive income (loss), net of tax:
Net unrealized securities (losses) gains		(3	)		5
Net unrealized derivatives gains		22			10
Foreign currency translation adjustments		101			42
Other		-			(2	)
Total accumulated other comprehensive income		120			55
Total shareholder’s equity		3,542			3,419
Total liabilities and shareholder’s equity	$	42,730		$	40,963

See Notes to Consolidated Financial Statements.

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AMERICAN EXPRESS CREDIT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions)
(Unaudited)

	Six Months Ended
	June 30,
		2007			2006
Cash Flows from Operating Activities
Net income	$	373		$	293
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for losses		403			302
Amortization and other		5			4
Deferred tax asset		(8	)		(20	)
Changes in operating assets and liabilities:
Due to affiliates		(14	)		10
Other operating assets and liabilities		96			500
Net cash provided by operating activities		855			1,089
Cash Flows from Investing Activities
Net increase in cardmember receivables and loans		(395	)		(1,470	)
Purchase of investments		-			(2,003	)
Maturities of investments		-			2,019
Net decrease (increase) in loans with affiliates		24			(328	)
Net decrease in due to affiliates		(82	)		(525	)
Net cash used in investing activities		(453	)		(2,307	)
Cash Flows from Financing Activities
Net decrease in short-term debt with affiliates with maturities
of ninety days or less		(1,645	)		(341	)
Net increase (decrease) in short-term debt with maturities of
ninety days or less		2,203			(1,082	)
Issuance of debt		3,559			8,100
Redemption of debt		(3,031	)		(4,974	)
Dividends paid		(300	)		(100	)
Net cash provided by financing activities		786			1,603
Effect of exchange rate changes on cash and cash equivalents		(3	)		-
Net increase in cash and cash equivalents		1,185			385
Cash and cash equivalents at beginning of period		737			1,051
Cash and cash equivalents at end of period	$	1,922		$	1,436

See Notes to Consolidated Financial Statements.

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AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation

The accompanying Consolidated Financial Statements should be read in conjunction with the financial statements in the Annual Report on Form 10-K of American Express Credit Corporation including its subsidiaries (Credco), where appropriate for the year ended December 31, 2006. Certain prior year amounts have been reclassified to conform to the current year presentation of the Consolidated Balance Sheets and Consolidated Cash Flows, including disclosures related to foreign currency translation adjustment and net cardmember receivables and loans. Significant accounting policies disclosed therein have not changed. Credco is a wholly-owned subsidiary of American Express Travel Related Services Company, Inc. (TRS), which is a wholly-owned subsidiary of American Express Company (American Express). American Express Overseas Credit Corporation Limited, together with its subsidiaries (AEOCC), Credco Receivables Corporation (CRC), Credco Finance, Inc., together with its subsidiaries (CFI), American Express Canada Credit Corporation (AECCC), American Express Canada Finance Limited (AECFL), American Express Capital Australia (AECA), American Express Sterling Funding Limited Partnership together with its subsidiary (AESLP), American Express Euro Funding Limited Partnership (AEELP) and American Express Credit Mexico LLC, together with its subsidiaries, are wholly-owned subsidiaries of Credco.

The interim financial information in this report has not been audited. In the opinion of management, all adjustments necessary for a fair statement of the consolidated financial position and the consolidated results of operations for the interim periods have been made. All adjustments made were of a normal, recurring nature. Results of operations reported for interim periods are not necessarily indicative of results for the entire year.

Accounting estimates are an integral part of the Consolidated Financial Statements. These estimates are based, in part, on management’s assumptions concerning future events. Among the more significant assumptions are those that relate to reserves for cardmember losses and investment securities valuation. These accounting estimates reflect the best judgment of management, but actual results could differ.

Recently Issued Accounting Standards

The Financial Accounting Standards Board (FASB) has recently issued the following accounting standards, which are effective beginning January 1, 2008. Credco is currently evaluating the impact of these accounting standards.

• Statement of Financial Accounting Standard (SFAS) No. 157, “Fair Value Measurements” (SFAS No. 157), establishes a framework for measuring fair value and applies broadly to financial and non-financial assets and liabilities measured at fair value under existing authoritative accounting pronouncements. SFAS No. 157 establishes a fair value hierarchy that prioritizes inputs to valuation techniques used for financial instruments without active markets and for non-financial assets and liabilities. SFAS No. 157 also expands disclosure requirements regarding methods used to measure fair value and the effects on earnings.
  
  
• SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115” (SFAS No. 159), provides companies with an option to report selected financial assets and liabilities at fair value.
• FASB Staff Position No. FIN 39-1, “Amendment of FASB Interpretation No. 39” (FIN 39-1), permits a reporting entity to offset fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) against fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement. Credco does not expect FIN 39-1 to have a material impact on its Consolidated Financial Statements.

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AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

• Emerging Issues Task Force Issue No. 06-11, “Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards” (EITF 06-11), clarifies when income tax benefits from dividends paid on share-based payment awards should be recognized in equity or the income statement. Credco does not expect EITF 06-11 to have a material impact on its Consolidated Financial Statements.

2. Investment Securities

The following is a summary of investment securities at June 30, 2007 and December 31, 2006:

Available-for-Sale	2007									2006
			Gross			Gross						Gross			Gross
			Unrealized		Unrealized			Fair				Unrealized		Unrealized			Fair
(Millions)	Cost		Gains			Losses		Value		Cost		Gains		Losses			Value
U.S. Treasury and government
agency securities	$	1,789	$	4	$	(4	)	$	1,789	$	2,294	$	7	$	(2	)	$	2,299
U.S. Treasury and government
agency securities - restricted		1,215		-		(4	)		1,211		714		2		-			716
Total	$	3,004	$	4	$	(8	)	$	3,000	$	3,008	$	9	$	(2	)	$	3,015

During the six months ended June 30, 2007, there were no purchases or maturities of U.S. Treasury and government agency securities. All of Credco’s investment securities are Available-for-Sale. There were no realized gains or losses for the six months ended June 30, 2007.

In conjunction with its liquidity investment portfolio, Credco entered into securities lending agreements in June 2006 with other financial institutions. Under these agreements, certain investment securities are loaned on an overnight basis to financial institutions, and are secured by collateral equal to at least 102 percent of the fair market value of the investment securities lent. Collateral received by Credco can be in the form of cash or marketable U.S. Treasury or government agency securities. Credco may only retain or sell these securities in the event of a borrower default. Credco’s loaned investment securities are considered restricted and pledged assets and, therefore, have been reclassified as investment securities restricted on the Consolidated Balance Sheet. The marketable securities received as collateral are not recorded on its Consolidated Balance Sheet, as Credco is not permitted to sell or repledge these securities absent a borrower default. Fees received from the securities lending transactions are recorded as interest income from investments. At June 30, 2007, $1.2 billion of investment securities were loaned under these agreements.

3. Comprehensive Income

The components of comprehensive income, net of related tax, were as follows:

	Three Months Ended							Six Months Ended
(Millions)	June 30,							June 30,
		2007			2006			2007		2006
Net income	$	201		$	167		$	373		$	293
Other comprehensive income (loss):
Net unrealized securities losses		(9	)		(7	)		(8	)		(4	)
Net unrealized derivatives gains		16			14			12			20
Foreign currency translation adjustments		47			19			59			13
Total	$	255		$	193		$	436		$	322

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AMERICAN EXPRESS CREDIT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

4.Income Taxes

Credco adopted FASB Financial Interpretation No.48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (FIN 48) as of January 1, 2007. The initial adoption of FIN 48 resulted in a charge of approximately $15 million to the January 1, 2007 balance of retained earnings.

As of January 1, 2007, and including the impact of the initial adoption charge to retained earnings, Credco’s total gross benefits for tax positions that have not been recognized through the financial statements were approximately $44 million, exclusive of interest and penalties described below. Included in the $44 million are approximately $38 million of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in a future period. There have not been any significant changes in Credco’s unrecognized tax benefits as of June 30, 2007.

Credco’s continuing practice is to recognize interest and penalties relating to unrecognized tax benefits in the income tax provision, which therefore has an impact on the effective tax rate. As of January 1, 2007, Credco had $8 million ($5 million after-tax) accrued for the payment of interest and penalties. There have not been any significant changes in Credco’s accrual for the payment of interest and penalties as of June 30, 2007.

The taxable income of Credco is included in the consolidated U.S. federal income tax return of American Express. Under an agreement with TRS, taxes are recognized on a separate company basis. If benefits for all future tax deductions, foreign tax credits and net operating losses cannot be recognized on a separate company basis, such benefits are then recognized based upon a share, derived by formula, of those deductions and credits that are recognizable on a TRS consolidated reporting basis.

American Express is under continuous examination by the Internal Revenue Service (IRS) and tax authorities in other countries and states in which American Express has significant business operations. The tax years under examination and open for examination vary by jurisdiction. American Express is currently under examination by the IRS for the years 1997- 2004.

Credco routinely assesses the likelihood of additional assessments in each of the taxing jurisdictions and has established a liability for unrecognized tax benefits that Credco’s management believes to be adequate. Once established, unrecognized tax benefits are adjusted if more accurate information is available, or a change in circumstance, or an event occurs necessitating a change to the liability. It is reasonably possible that the unrecognized tax benefits will significantly increase or decrease within the next twelve months. Due to the inherent complexities and the number of tax years currently under examination, it is not possible to quantify the impact such changes may have on the effective tax rate.

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AMERICAN EXPRESS CREDIT CORPORATION

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

American Express Credit Corporation (Credco) was incorporated in Delaware in 1962 and was acquired by American Express Company (American Express) in December 1965. On January 1, 1983, Credco became a wholly-owned subsidiary of American Express Travel Related Services Company, Inc. (TRS), a wholly-owned subsidiary of American Express. Credco is primarily engaged in the business of financing non-interest-bearing cardmember receivables arising from the use of the American Express^® card, the American Express^® Gold card, Platinum card^®, Corporate card and other American Express’ cards issued in the United States, and in designated currencies outside the United States. Credco also purchases certain interest-bearing and discounted revolving loans and extended payment plan receivables comprised of American Express credit cards, Sign & Travel^® and Extended Payment Option receivables and lines of credit and loans to American Express Bank Ltd. (AEB) customers, although cardmember loans are primarily funded by subsidiaries of TRS other than Credco. American Express cards and American Express credit cards are collectively referred to herein as the card.

Results of Operations for the Six Months Ended June 30, 2007 and 2006

Credco’s consolidated net income rose 27 percent to $373 million for the six months ended June 30, 2007, as compared to the six months ended June 30, 2006. The year-over-year increase was primarily due to the increase of discount revenue earned on purchased cardmember receivables and loans and the interest income on loans to affiliates and investments, offset by the increase of interest expense to affiliates and others and provision for losses, net of recoveries.

The following is an analysis of the changes attributable to the increase (decrease) in key revenue and expense accounts for the six month period ended June 30, 2007, compared with the six month period ended June 30, 2006, (millions):

Discount revenue earned on purchased cardmember receivables and loans:
Volume of receivables purchased	$	15
Discount rates		370
Total	$	385
Interest income from affiliates:
Average loans and deposits with affiliates	$	34
Interest rates		29
Total	$	63
Interest income from investments:
Average investments outstanding	$	-
Interest rates		33
Total	$	33
Finance charge revenue:
Volume of loans purchased	$	-
Interest rates		1
Total	$	1
Provision for losses, net of recoveries:
Volume of receivables purchased	$	8
Provision rates and volume of recoveries		91
Total	$	99

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AMERICAN EXPRESS CREDIT CORPORATION

Interest expense:
Average debt outstanding	$	64
Interest rates		105
Total	$	169
Interest expense with affiliates:
Average debt outstanding	$	15
Interest rates		53
Total	$	68

Discount Revenue Earned on Purchased Cardmember Receivables and Loans

Discount revenue increased 40 percent or $385 million to $1.4 billion for the six months ended June 30, 2007, as compared to the six months ended June 30, 2006. The year-over-year increase was primarily due to an increase in both discount rates and to a lesser extent volume of receivables purchased. Volume of receivables and loans purchased for the six months ended June 30, 2007, was three percent higher than the same period a year ago; purchased volume does not include those cardmember receivables transferred with recourse to Credco and cardmember receivables and loans funded by loans to affiliates. Discount rates, which vary over time due to changes in market interest rates or changes in the collectibility of cardmember receivables, increased an average of approximately 26 basis points compared to the six months ended June 30, 2006.

Interest Income from Affiliates

Interest income from affiliates increased 26 percent or $63 million to $303 million for the six months ended June 30, 2007, as compared to the six months ended June 30, 2006. The year-over-year increase is primarily due to an increase in both the volume of loans with affiliates and the interest rates charged to affiliates. The average rate charged to affiliates during the six months ended June 30, 2007, was 30 basis points higher than the average rate charged to affiliates in the same six month period a year ago, primarily due to the floating rate interest-bearing borrowings with affiliates.

Interest Income from Investments

Interest income from investments increased 34 percent or $33 million to $130 million for the six months ended June 30, 2007, as compared to the six months ended June 30, 2006. The year-over-year increase is due to a higher interest rate environment as well as the replacement of matured U.S. Treasury securities in 2006 primarily with higher yielding government agency securities. The average interest rate on the total investment portfolio increased approximately 65 basis points for the six months ended June 30, 2007, as compared to the same six month period a year ago.

Provision for Losses, Net of Recoveries

The provision for losses, net of recoveries increased 46 percent or $99 million to $314 million for the six months ended June 30, 2007, as compared to the six months ended June 30, 2006. The year-over-year increase reflects a higher loss rate offset by results from collection activities. The loss rate which rose from the unusually low rates that followed the October 2005 change in the U.S. bankruptcy legislation.

Interest Expense and Interest Expense to Affiliates

Interest expense and interest expense to affiliates increased 28 percent and 46 percent, respectively, for the six months ended June 30, 2007, as compared to the same period a year ago, due to an increase in both the levels of debt funding and higher effective cost of funds. The average interest rate on debt outstanding during the six months ended June 30, 2007, was 36 basis points higher than the same period a year ago. The average rate due to affiliates during the six

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AMERICAN EXPRESS CREDIT CORPORATION

months ended June 30, 2007, was 66 basis points higher than the same period a year ago, primarily due to the fact that a high proportion of the interest-bearing borrowings due to affiliates were at floating rate.

Service Fees to Affiliates

Credco pays fees to affiliates for the related servicing of the receivables purchased. Service fees to affiliates increased $69 million for the six months ended June 30, 2007, as compared to the six months ended June 30, 2006, due to an increase in volume of usage of the service level agreements with affiliates.

Income Taxes

Credco's effective tax rate for the six months ended June 30, 2007 was 12 percent compared with 15 percent for the six month period ended June 30, 2006.

Cardmember Receivables

At both June 30, 2007 and December 31, 2006, Credco owned $27.6 billion of cardmember receivables and participation interests in cardmember receivables.

Credco generally purchases, without recourse, cardmember receivables and cardmember loans arising from the use of the card throughout the world pursuant to agreements with TRS and certain of its subsidiaries that issue the card. During the six months ended June 30, 2007 and December 31, 2006, Credco purchased $141.7 billion and $141.9 billion of cardmember receivables, respectively.

Participation interests in cardmember receivables represent undivided interests in the cash flows of the non-interest-bearing cardmember receivables and are purchased without recourse by Credco Receivables Corporation (CRC), from American Express Receivables Corporation V LLC (RFC V). During May 2005, TRS established the American Express Issuance Trust (AEIT), which is used to securitize cardmember receivables originated by TRS and its subsidiaries. AEIT is a non-qualifying special purpose entity that is consolidated by RFC V. RFC V, in turn, is consolidated by TRS. Beginning in May 2005, CRC purchased participation interests without recourse held by AEIT from RFC V. At June 30, 2007 and December 31, 2006, CRC owned approximately $7.1 billion and $8.2 billion, respectively, of participation interests purchased from RFC V.

The following table summarizes selected information related to the cardmember receivables portfolio:

	June 30,			December 31,			June 30,
As of and for six months ended (Millions, except percentages)	2007			2006			2006
Total cardmember receivables	$	27,579		$	27,593		$	25,825
90 days past due as a % of total		3.3	%		3.3	%		3.1	%
Loss reserves	$	752		$	739		$	665
as a % of receivables		2.7	%		2.7	%		2.6	%
as a % of 90 days past due		82	%		80	%		82	%
Write-offs, net of recoveries	$	299		$	301		$	224
Net write-off rate (1)		0.21	%		0.21	%		0.16	%
Average life of cardmember receivables (in days) (2)		34			33			32

(1)	Credco’s write-offs, net of recoveries, expressed as a percentage of the volume of cardmember receivables purchased by Credco in each of the periods indicated.
(2)	Represents the average life of cardmember receivables owned by Credco, based upon the ratio of the average amount of both billed and unbilled receivables owned by Credco at the end of each month, during the periods indicated, to the volume of cardmember receivables purchased by Credco.

Cardmember receivables decreased slightly from December 31, 2006, as a result of lower cardmember receivables purchased during the six months ended June 30, 2007, compared to the six months ended December 31, 2006 due to seasonality. The cardmember receivables purchased for the six months ended June 30, 2007, increased approximately three percent from the cardmember receivables purchased during the six months ended June 30, 2006, due to overall business growth.

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AMERICAN EXPRESS CREDIT CORPORATION

Cardmember Loans

At June 30, 2007 and December 31, 2006, Credco owned cardmember loans totaling $0.4 billion and $0.3 billion, respectively. These loans consist of certain interest-bearing and discounted extended payment plan receivables comprised principally of American Express credit card, Sign & Travel^® and Extended Payment Option receivables. During the six months ended June 30, 2007 and December 31, 2006, Credco purchased $772 million and $464 million of cardmember loans, respectively.

The following table summarizes selected information related to the cardmember loans portfolio:

As of and for six months ended		June 30,			December 31,			June 30,
(Millions, except percentages)		2007			2006			2006
Total cardmember loans	$	366		$	356		$	321
Past due cardmember loans as a % of total:
30-89 days		5.9	%		5.9	%		6.2	%
90+ days		1.8	%		2.1	%		2.1	%
Loss reserves	$	9		$	10		$	9
as a % of cardmember loans		2.5	%		2.8	%		3.0	%
as a % of past due		33	%		35	%		37	%
Write-offs, net of recoveries	$	4		$	3		$	5
Net write-off rate (1)		2.44	%		1.96	%		2.11	%

(1)    Credco’s write-offs, net of recoveries, expressed as a percentage of the average amount of cardmember loans owned by Credco at the beginning of the year and at the end of each month in each of the periods indicated.

Cardmember loans increased $10 million from December 31, 2006, primarily due to higher cardmember loans purchased, and increased $45 million from June 30, 2006, due primarily to increased volumes purchased from Singapore.

Reserves for Cardmember Receivables and Cardmember Loans

The following is an analysis of the reserves for cardmember receivables and cardmember loans:

		June 30,			June 30,
Six months ended (Millions)		2007			2006
Balance, beginning of period	$	749		$	686
Provision for losses		403			302
Accounts written-off		(394	)		(316	)
Other		3			2
Balance, end of period	$	761		$	674

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AMERICAN EXPRESS CREDIT CORPORATION

Loans with Affiliates

Components of loans with affiliates were as follows:

		June 30,	December 31,			June 30,
(Millions)		2007		2006		2006
TRS Parent	$	-	$	531	$	531
TRS Subsidiaries:
American Express Australia Limited		3,898		3,529		3,168
American Express Services Europe Limited		3,518		3,360		3,040
Amex Bank of Canada		2,393		2,166		1,907
American Express Co. (Mexico) S.A. De C.V.		366		-		-
American Express International, Inc.		3		105		155
Total	$	10,178	$	9,691	$	8,801

Credco’s loans with affiliates represent fixed and floating rate interest-bearing intercompany borrowings by other wholly-owned TRS subsidiaries and American Express. Of the $10.2 billion outstanding as of June 30, 2007, $7.8 billion is due to the transfer of cardmember receivables and cardmember loans with recourse and is collateralized by third-party assets owned by American Express or TRS and its subsidiaries. Revenue earned from cardmember receivables with recourse and cardmember receivables and loans funded by loans to affiliates is recorded as interest income from affiliates in the Consolidated Statement of Income. The average yield earned on loans with affiliates is approximately 6.2 percent and 5.8 percent for the period ended June 30, 2007 and December 31, 2006, respectively. Loss reserves are determined for each of these intercompany borrowing arrangements on a specific identification basis. As of June 30, 2007, no loss reserves have been recorded and no amount of loans is 30 days or greater past due. On February 9, 2007, the loan with TRS Parent of $531 million was repaid.

Liquidity and Capital Resources

Financing Activities

Credco’s funding requirements are met primarily by the sale of commercial paper, the issuance of medium- and long-term notes, borrowings under long-term bank credit facilities in certain international markets and equity capital. Credco has readily sold the volume of commercial paper necessary to meet its funding needs as well as to cover the daily maturities of commercial paper issued. During the six months ended June 30, 2007, Credco had uninterrupted access to the commercial paper and capital markets to fund its business operations.

The commercial paper market represents the primary source of short-term funding for Credco. At June 30, 2007 and December 31, 2006, Credco had $7.8 billion and $5.8 billion of commercial paper outstanding, respectively. Average commercial paper outstanding was $7.1 billion and $6.8 billion for the six months ended June 30, 2007 and December 31, 2006, respectively. Credco currently manages the level of short-term debt outstanding such that its total back-up liquidity, including available bank credit facilities and term liquidity portfolio investment securities, is not less than 100 percent of net short-term debt. Net short-term debt, which consists of commercial paper and certain other short-term borrowings less cash and cash equivalents, was $6.1 billion at June 30, 2007. Based on the maximum available borrowings under bank credit facilities and term liquidity portfolio investment securities, Credco’s total back-up liquidity coverage of net short-term debt was 181 percent at June 30, 2007.

Credco raises term funding primarily through the issuance of medium- and long-term debt securities in the U.S. and international capital markets. Medium-term debt is generally defined as any debt with an original maturity greater than 12 months but less than 36 months. Long-term debt is generally defined as any debt with an original maturity greater than 36 months. At June 30, 2007 and December 31, 2006, Credco had an aggregate of $11.7 billion and $12.4 billion, respectively, of medium-term debt outstanding at fixed and floating rates, a portion of which can be extended by the holders up to an additional four years. Credco’s outstanding long-term debt at June 30, 2007 and December 31, 2006 was $11.1 billion and $9.4 billion, respectively.

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AMERICAN EXPRESS CREDIT CORPORATION

Credco also has the ability to issue debt securities under shelf registrations filed with the Securities and Exchange Commission (SEC). During the second quarter of 2006, Credco filed a shelf registration statement with the SEC for an unspecified amount of debt securities to be issued from time to time. During the six months ended June 30, 2007, Credco issued $1.6 billion of floating medium-term notes. At June 30, 2007, Credco had $13.6 billion of debt securities outstanding, issued under SEC registration statements.

Credco, TRS, American Express Overseas Credit Corporation Limited (AEOCC), a wholly-owned subsidiary of Credco, American Express Centurion Bank, a wholly-owned subsidiary of TRS, American Express Bank, FSB, a wholly-owned subsidiary of TRS, and American Express Bank Ltd., a wholly-owned subsidiary of American Express, have established a program for the issuance, outside the U.S., of debt instruments to be listed on the Luxembourg Stock Exchange. As of June 30, 2007, the maximum aggregate principal amount of debt instruments outstanding at any one time under the program may not exceed $10 billion. At June 30, 2007, $4.6 billion was outstanding under this program, of which $3.3 billion were issued by Credco. On July 30, 2007, Credco issued approximately $101 million of fixed rate notes due in 2012.

American Express Canada Credit Corporation (AECCC), a wholly-owned subsidiary of Credco, had approximately $2.2 billion of total debt securities outstanding under the Canadian shelf registration program. At June 30, 2007, approximately $1.1 billion was available for issuance. All notes issued under this shelf registration are guaranteed by Credco. The financial results of AECCC are included in the consolidated financial results of Credco.

During the fourth quarter of 2006, Credco established a program for the issuance from time to time, in Australia, of up to approximately $5.1 billion. During the second quarter of 2007, Credco issued approximately $169 million of fixed rate notes due in 2010 and approximately $212 million of floating rate notes due in 2010. At June 30, 2007, approximately $4.3 billion was available for issuance under this program.

Credco paid cash dividends of $300 million to TRS during the six months ended June 30, 2007. On August 10, 2007, Credco paid a cash dividend of $150 million to TRS.

The most restrictive limitation on dividends imposed by the debt instruments issued by Credco is the requirement that Credco maintain a minimum consolidated net worth of $50 million. There are no significant restrictions on the ability of Credco to obtain funds from its subsidiaries by dividend or loan. Additionally, there are no limitations on the amount of debt that can be issued by Credco.

Liquidity InvestmentPortfolio

During the normal course of business, funding activities may raise more proceeds than are necessary for immediate funding needs. These amounts are invested principally in short-term overnight, highly liquid securities.

Credco also maintains a term liquidity portfolio comprised of high credit quality, highly liquid securities. At June 30, 2007, Credco held $3.0 billion in U.S. Treasury and government agency securities in this portfolio. The invested amounts of the term liquidity portfolio provide back-up liquidity, primarily for Credco’s commercial paper program.

In conjunction with its liquidity portfolio, Credco entered into securities lending agreements in June 2006 with financial institutions to enhance investment income. At June 30, 2007, approximately $1.2 billion of investment securities were loaned under these agreements.

Committed Bank Credit Facilities

At June 30, 2007, Credco has the right to borrow a maximum amount of $11.1 billion (including amounts outstanding) under committed bank credit facilities, with a commensurate maximum $1.2 billion reduction in the amount available to American Express. These facilities expire as follows (billions): 2009, $3.6; 2010, $4.8; and 2011, $2.7. As of June 30, 2007, Credco had outstanding borrowings of $3.0 billion under these bank credit facilities related to the Australian credit facility. On August 1, 2007, the $5.0 billion U.S. credit facility was replaced by $2.0 billion that expire in 2010 and $3.0 billion that expire in 2012. On August 7, 2007, the Australian credit facility was renewed and extended until 2012.

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AMERICAN EXPRESS CREDIT CORPORATION

The availability of the credit lines is subject to compliance with certain financial covenants by Credco, including the maintenance of a 1.25 ratio of earnings to fixed charges. The ratio of earnings to fixed charges for Credco was 1.43 for the six months ended June 30, 2007. The ratio of earnings to fixed charges for American Express for the six months ended June 30, 2007 was 2.47.

Forward-Looking Statements

Various statements have been made in this Quarterly Report on Form 10-Q that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may also be made in Credco’s other reports filed with the SEC and in other documents. In addition, from time to time, Credco through its management may make oral forward-looking statements. Forward-looking statements are subject to risks and uncertainties, including those identified below, which could cause actual results to differ materially from such statements. The words “believe,” “expect,” “anticipate,” “optimistic,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely” and similar expressions are intended to identify forward-looking statements. The factors described below are not exclusive. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. Credco undertakes no obligation to update or revise any forward-looking statements. Factors that could cause actual results to differ materially from Credco’s forward-looking statements include, but are not limited to:

• credit trends and the rate of bankruptcies, which can affect spending on card products and debt payments by individual and corporate customers;



• Credco’s ability to accurately estimate the provision for losses in Credco’s outstanding portfolio of cardmember receivables and loans;



• fluctuations in foreign currency exchange rates;



• negative changes in Credco’s credit ratings, which could result in decreased liquidity and higher borrowing costs;



• the effect of fluctuating interest rates, which could affect Credco’s borrowing costs; and



• the impact on American Express Company’s business resulting from continuing geopolitical uncertainty.

OTHER REPORTING MATTERS

Accounting Developments

See “Recently Issued Accounting Standards” section of Note 1 to the Consolidated Financial Statements.

Item 4. CONTROLS AND PROCEDURES

Credco’s management, with the participation of Credco’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Credco’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, Credco’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, Credco’s disclosure controls and procedures are effective. There have not been any changes in Credco’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, Credco’s internal control over financial reporting.

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AMERICAN EXPRESS CREDIT CORPORATION

PART II. OTHER INFORMATION

Item 6. EXHIBITS

The list of exhibits required to be filed as exhibits to this report are listed on page E-1 hereof, under “Exhibit Index,” which is incorporated herein by reference.

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AMERICAN EXPRESS CREDIT CORPORATION

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

AMERICAN EXPRESS CREDIT CORPORATION
(Registrant)

DATE:	August 14, 2007	By	/s/ Christopher S. Forno
			Christopher S. Forno
			President and Chief Executive Officer
DATE:	August 14, 2007	By	/s/ Kevin M. Gould
			Kevin M. Gould
			Vice President and Chief Accounting Officer

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AMERICAN EXPRESS CREDIT CORPORATION

EXHIBIT INDEX

Pursuant to Item 601 of Regulation S-K

	Description	How Filed
Exhibit 12.1	Computation in Support of Ratio of	Electronically filed herewith.
	Earnings to Fixed Charges of American
	Express Credit Corporation.
Exhibit 12.2	Computation in Support of Ratio of	Electronically filed herewith.
	Earnings to Fixed Charges of American Express
	Company.
Exhibit 31.1	Certification of Christopher S. Forno, Chief	Electronically filed herewith.
	Executive Officer, pursuant to Rule 13a-14(a)
	promulgated under the Securities Exchange Act
	of 1934, as amended.
Exhibit 31.2	Certification of David L. Yowan, Chief	Electronically filed herewith.
	Financial Officer, pursuant to Rule 13a-14(a)
	promulgated under the Securities Exchange Act
	of 1934, as amended.
Exhibit 32.1	Certification of Christopher S. Forno, Chief	Electronically filed herewith.
	Executive Officer, pursuant to 18 U.S.C.
	Section 1350, as adopted pursuant to Section
	906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2	Certification of David L. Yowan, Chief	Electronically filed herewith.
	Financial Officer, pursuant to 18 U.S.C. Section
	1350, as adopted pursuant to Section 906 of the
	Sarbanes-Oxley Act of 2002.

E-1