The largest credit card company in the US in terms of purchases, American Express, has said that it will cut around 10 per cent of its global workforce in a bid to cut costs in the face of rising defaults.

Defaults on credit cards have been increasing as consumers bear the brunt of higher unemployment.

In a statement, the New York-based Amex said it will take a charge in the fourth-quarter of almost $290 million as the cost of eliminating 7,000 jobs that will save the company almost $1.8 billion during 2009. Other measures include a freeze on hiring and management raises, and shortened budgets for technology and marketing.

The American Express ''reengineering plan'' includes reducing staffing levels and compensation expenses, cutting operating costs and scaling back investment spending.

The card company said that other measures include a restructuring charge of approximately $370 to $440 million pre-tax, which translates as approximately $240 to $290 million after-tax, in the fourth quarter, associated primarily with severance and other costs related to the elimination of approximately 7,000 jobs or about 10 per cent of the company's worldwide workforce.

It said that the staff reductions would occur across business units, markets and staff groups primarily focusing on management and other positions that do not interact directly with customers.

Amex has suspended management level salary increases for 2009, and will put in place a hiring freeze for open positions.

The total benefit from these staffing and compensation-related decisions is expected to be approximately $700 million in 2009, it said in a statement.

Amongst further measures, American Express plans to reduce operating costs by cutting expenses for consulting and other professional services, travel and entertainment, and general overheads, that are expected to realise benefits of approximately $125 million next year.

By scaling-back investment spending on technology, marketing and business development, and streamlining costs associated with some rewards programs, American Express is anticipating a cost benefit of around $1 billion in 2009.

''We've been engaged for the past few months in an intensive, companywide review of priorities and staffing levels,'' said Kenneth I Chenault, chairman and chief executive officer of American Express.

''The reengineering program we announced today will help us to manage through one of the most challenging economic environments we've seen in many decades. It will also put us in position to ramp-up investment spending as economic conditions improve so that we can take advantage of the substantial opportunities that will be available to us over the medium to long term.''

Reports quoted Moody's investor service as saying in a 16 October report that credit card defaults are virtually certain to surpass the post-recession peaks they had hit in 2003. The unemployment is expected to rise until the fourth quarter of 2009, which will ensure that the default rate goes to a peak of around 8.5 per cent from 6.82 per cent it had held during August 2008.