NEW YORK _ American Express Co. shares tumbled Tuesday after the credit card giant said it received government approval to begin taking deposits -- a stark sign the lender is facing difficulty funding its operations amid the credit crisis.

Shares plunged $1.58, or 6.6 percent, to close at $22.40. Shares have traded from $20.50 to $60 in the past 12 months.

Late Monday, American Express said it received approval from the Federal Reserve to become a bank holding company, a structure similar to most commercial banks. The change allows American Express to create a large deposit base and have permanent access to financing from the Fed.

The change also allows the credit card company to take part in recent programs initiated by the government to help reduce the current turmoil in the global credit markets, including the Treasury Department's program to directly invest in banks.

"This was the right move for the company, given the uncertain economic climate and still extreme financial market volatility and illiquidity," said Fox-Pitt Kelton analyst Howard Shapiro in a note to clients late Monday. "Although currently well capitalized, the company did indicate to us it would consider a capital investment from Treasury."

Much of American Express' funding comes from packaging credit card receivables and selling them as securities to investors. The market for those securities has dried up in recent months as investors have shied away from purchasing all but the safest forms of debt.

Friedman, Billings, Ramsey & Co. analyst Scott Valentin reiterated an "Underperform" rating on American Express shares, adding that he viewed the move to become a bank holding company as a "modest positive."

While the decision was prudent in the sense that it opens up additional and potentially cheaper sources of funding, it also underscores Valentin's belief that American Express is experiencing significant funding stress.

Valentin is also concerned that competition for deposits among banks remains intense and that the company lacks the branch presence to be competitive.

American Express joins investment banks Goldman Sachs Group Inc. and Morgan Stanley in becoming bank holding companies. Goldman and Morgan Stanley received approval in late September amid worries that stand-alone investment banks were no longer viable after Lehman Brothers Holdings Inc. filed for bankruptcy protection and Merrill Lynch & Co. was sold to Bank of America Corp.

"The credit markets are still not working. The only way that funds can flow into these companies is by getting deposits," said Reena Aggarwal, professor of finance at Georgetown University's McDonough School of Business in an interview with The Associated Press. "That is seen as a safe business these days."

American Express said late last month that it would cut 7,000 jobs, or about 10 percent of its work force, in an effort to slash costs by $1.8 billion in 2009.

The company also said it expects write-offs in its credit card portfolio to continue to increase in the fourth quarter and into next year, as an increasing number of consumers struggle to pay off debt and reduce their spending amid a worsening economic downturn.