American Express resumes pay raises - memo

* CEO cites improving economy

* AmEx had cut pay as defaults rose.

* Other expenses still being curbed

* Shares close up 0.74 percent

NEW YORK, Sept 24 - American Express Co will reverse companywide pay cuts instituted seven months ago because the credit card company sees an improving economy, according to a memo by Chief Executive Kenneth Chenault obtained by Reuters.

American Express, which repaid its $3.4 billion from the government's Troubled Asset Relief Program this summer, will reverse a 10 percent salary cut for executives above senior vice president levels, the memo to employees said. The company will also allow merit pay increases and, in January, resume contributions to corporate retirement plans.

The reversal effectively impacts all of American Express' 60,000 employees worldwide, a company spokeswoman said.

American Express will maintain previous cuts on expenses, however, including travel, entertainment, meetings, consulting and training, introduced last fall.

The memo cited a stronger economic outlook in coming months for the pay policy reversal, but noted strong economic headwinds still exist.

"The challenges we face are far from over," wrote Chenault.

American Express' stock rose 25 cents, or 0.74 percent, to close at $33.85 on the New York Stock Exchange.