(Adds analyst comment)

By Juan Lagorio and Patrick Rucker

NEW YORK/WASHINGTON, Nov 10 (Reuters) - American Express Co (AXP.N: Quote, Profile, Research) said it won approval to become a bank holding company, in a step that could cut its borrowing costs and give it more access to government money.

American Express, the fourth-largest U.S. credit card issuer, offered more credit to more customers even as the housing crisis began last year, and is paying the price as delinquencies rise.

Adding to its difficulties, its main sources of funding have grown more expensive as secured and unsecured bond markets have shut down.

Investors are wondering whether financial companies that loan money but fund themselves mainly in the bond markets are a thing of the past. Goldman Sachs Group Inc (GS.N: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research) both became banks in September.

With American Express winning U.S. Federal Reserve approval to convert to a bank holding company, it can issue bonds that are government guaranteed through the end of June 2012.

The company can also apply to receive money under the U.S. Treasury's $700 billion Troubled Assets Relief Program, which is making direct investments in banks, insurers and possibly other financial companies.

Analyst Moshe Orenbuch at Credit Suisse estimates that American Express would be eligible for several billion dollars of capital under the program.