Discount revenue rose 3 percent during 2002 as a result of a 4 percent increase in billed business partially offset by a lower discount rate. Discount revenue fell 1 percent in 2001 as billed business growth was more than offset by a lower discount rate. The 4 percent increase in billed business in 2002 primarily resulted from a 4 percent growth in cards-in-force and higher spending per basic cardmember worldwide. U.S. cards-in-force rose 2 percent and 4 percent in 2002 and 2001, respectively, reflecting the impact of more selective consumer card and small business acquisition activities during the past year in light of weak economic conditions. International cards-in-force increased 8 percent and 12 percent in 2002 and 2001, respectively, due to growth in proprietary card products, as well as network card growth. Proprietary card growth was slower during 2002, reflecting attrition due to adverse business conditions in Argentina, Brazil and Hong Kong. Cards-in-force growth accelerated worldwide in the second half of 2002, including the addition of over 900,000 cards in the fourth quarter. U.S. billed business rose 4 percent reflecting 8 percent growth within the consumer card business (on 10 percent higher trans- action volume), 4 percent growth in small business services volume and a 3 percent decline within Corporate Services. U.S. non-T&E related volume categories (which represented approximately 63 percent of U.S. billed business during 2002) grew  9 percent versus last year while U.S. T&E volumes declined 2 percent. Worldwide airline related volume declined 6 percent on a single-digit decline in the average airline charge and flat transaction volumes. The decline in the discount rate in 2001 reflects the cumulative impact of stronger than average growth in the lower rate retail and other “everyday spend” merchant categories (i.e., supermarkets, discounters, etc.). Net card fees increased slightly in 2002 and 2001, reflecting the growth in cards-in-force in both years. The average fee per card remained at $34 in both 2002 and 2001, down from $36 in 2000, reflecting the mix shift toward lower and no fee products. Lending net finance charge revenue rose 16 percent and 32 percent in 2002 and 2001, respectively. During 2002, average world- wide lending balances increased 7 percent. The net interest yield on the U.S. portfolio rose, as a decrease in the proportion of the portfolio on introductory rates and the benefit of declining funding costs throughout both years were partially offset by the evolving mix of products toward more lower-rate offerings. Travel commissions and fees declined 8 percent in 2002 as a result of a 10 percent contraction in travel sales reflecting the weaker corporate travel environment throughout the year. Travel commissions and fees declined 16 percent in 2001 as a result of a 24 percent contraction in travel sales due to the effects of the September 11th terrorist attacks and the weaker corporate travel environment. Other revenues decreased 2 percent in 2002 due to significantly lower interest income on investment and liquidity pools held within card funding vehicles, which partially offset higher insurance related revenues. The increases in other revenues in 2001 include the effect of higher card related fee income and larger insurance premiums. Marketing and promotion expense increased 20 percent in 2002 from the launch of the new brand advertising campaign, the introduction of the new charge cards with Membership Rewards built-in and the Cash Rebate card, more loyalty marketing, and an increase in selected card acquisition activities. Marketing and promotion expense declined 15 percent in 2001 as certain marketing efforts were rationalized in light of the weaker business environment. The charge card provision on card products decreased 22 percent in 2002 on strong credit quality reflected in an improved past due rate and loss ratio. The net loss ratio decreased to 0.38% in 2002 from 0.42% in 2001. Charge card provision increased in 2001 due to higher volumes and generally weaker economic and business conditions. The worldwide lending provision rose in both 2002 and 2001, reflecting portfolio growth and, in 2002, increased reserve coverage levels. In 2001, the increase was also due to generally weaker economic and business conditions, as unemployment and bankruptcies increased. The net write-off rate was 6.0% in 2002 versus 5.6% in 2001.  Charge card interest expense declined 33 percent in 2002 due to a lower effective cost of funds and a lower average receivable balance. Charge card interest expense rose in 2001 as a result of higher borrowing rates which were partly offset by lower billed business volumes. I 38 AXP I FINANCIAL REVIEW