The Credit Crunch You WON'T Be Expecting (Especially ... American Express)! UPDATED!!!
Oct 24 '08 (Updated Oct 30 '08)
The Bottom Line Your Available Credit & Rating May be Severely Damaged if you don't read this!
Background
This is just a quick head's-up to a situation that has literally been BROUGHT to my doorstep, and I've learned is becoming more prevalent. Credit card companies, in an effort to hedge the extremely poor bets they made in our subprime mortgage debacle, are now engaging in credit profiling, and reducing card holders' credit limits--despite the fact if one has (as we have) never been late, never missed a payment, and constantly use the card (generating them profit).
The Beginning
We have held the American Express Gold Card for the better part of half a decade. We have a perfect payment record. This year, however, we received a notice that, due to our annual review, our "no pre-set limit" was being reduced, by about $750 (this took it from around $6300 to $5600). We were not happy.
When I called them about this, they gave me the story about the "many factors involved" in this decision. We did have a preexisting situation on the cardholder's (my wife's) credit, with a totally separate creditor that I'm sure contributed to this, but they also said they look at how much we pay over the minimum (not terribly much), if we'd been paying down on the "Sign and Travel" balance portion that we'd been carrying forward (we hadn't), our income, etc.
Act Two
And just a few days ago, after making a $1600 payment, our card was declined for an $85 charge. I again called them, and they said that they'd sent out a letter explaining the second reduction--something that couldn't possibly have ANYTHING to do with them and us. Again, we have a perfect payment history with them, about 72 times in a row.
Just the Beginning
I did a little poking around on the web yesterday. A PLETHORA of examples with, not just American Express, but other credit card companies, presented themselves. Every example included someone with a perfect payment history, and some paid their balances off COMPLETELY each month. One person had their limit cut in HALF--from $30,000 to $15,000. And none of these examples could point to any credit-reducing event. One fellow even subscribed to a service that informed him of any change in his credit (and there had been none). Clearly, these companies are trying to come up with ANY excuse to cut credit and limit their losses in relation to the subprime debacle--regardless of the effect on the cardholders' credit.
I also read an article over at MSN.com/money. It spoke of companies reducing, and even closing out, credit limits simply because the cardholder held a mortgage with an "at-risk" company. Other articles spoke about other factors including: the number of foreclosures in the cardholder's area, the industry worked in, and whether or not they were self-employed, among others I may not be completely recalling right now. All this, despite the $750 billion bailout, which WE are paying for. How's that for reciprocity?
"Chasing Down the Balances"
Some have reported that credit card companies are instituting the new, reduced credit limits right after they make their payments, or their annual fee. One fellow said his limit was reduced from $3500 to $99 and, in some cases, some pending authorizations were allowed, causing balances to go over the new limits. Those resulted in over-the-limit charges, and produced black marks on credit reports. Those that couldn't pay down to below the new limits were subjected to late fees, as well.
Final Thoughts
On one hand, I'm very disappointed with the actions of American Express and other credit card companies. I can understand why they would limit credit due to the wider situation with the economy, but there are still those of us who are able to make their payments. In addition, there are those that really won't be affected-like the 40% who weren't during the Great Depression-and they really won't care). The sad part is that those of us who expected to use our credit for flexibility, and continue to make our payments, are being unduly punished. And doubly so, since we, as taxpayers, are their saviours, bankrolling their rescue. What next--should we cash out all of our credit card rewards points before they get rid of that, too?
It's becoming really obvious that these huge financial institutions are the only thing that America will save, if Rome burns. Not Hurricane Katrina, other natural superdisasters, nor the potential loss of ordinary taxpayers' humble abodes, through related insurance fraud, will move this country to such hypocritical hyperbole (hooplah around sudden passage of sweetened bailout bill) as a huge bank running afoul of its calculated risks.
It is almost as if we signed our souls away when we agreed to let them modify the terms of our agreements "at any time." What other industry widely uses such liberal conditions? Why are auto repair shops strictly required to keep the final bill within a reasonable variance from the signed estimate, yet banks are allowed to treat our agreements like silly putty? It is my hope that the new administration will enact something to rectify the many wrongs these lobbied-up institutions have been allowed to inflict upon us, and reverse the trend that is making the subprime mess even worse.
UPDATE!!!
I heard this on AM 1070 radio (Los Angeles) this morning. Several credit card companies, including American Express, have imposed credit "floors." Even if you have bullet-proof credit, there is an absolute bottom limit for the interest they'll charge (they mentioned 10%); and if you have "bad" credit, the lowest you'll get is 20%. Recent laws have required them to disclose these policies more, so it's time for us to REALLY ask questions, so we can find the best cards, and utilize the balance transfers. Again, they are desperately protecting their risky mortgage investments. The station also mentioned that many companies are labeling entire STATES as riskier, and raising interest and imposing stricter terms (CALIFORNIA was explicitly mentioned). I'm beginning to wonder if it's time to jump ship from this sinking establishment! Does anyone know what the easiest state to get rich in is--a good balance of cost-of-living and job availability?
Resources & Citations
The website url's were too long to be placed here, but if you Google "american express never missed a payment cut my credit," you will get the sites I tried to insert.
When my credit score goes UP, I feel like doing THIS!
Here are a few of my fave reviews--
How to Whittle Down Your Monthly Bills and BUY Yourself Some TIME!
3 Simple Self-Defense Moves EVERY Woman Should Know!
Emile Hirsch Walks..."Into the Wild"
Tom Muzila's new book-Mental Karate
How to Find Computer & Electronics Deals
2002 Buick Regal LS
Microsoft Vista Home Premium
Ahead Nero Ultra v.6 CD/DVD-burning software
Rubbermaid Soap-dispensing Dish Wand
Tomtom One 3rd ed. GPS
Whistler XTR-330 Radar Detector
Kenwood KDC-MP435U CD/MP3 Car Stereo
 |
|
|
|
|
|
|
Epinions.com ID:
kengland4
|
|
Member: Kevin England
Location: Signal Hill, CA USA
Reviews written: 98
Trusted by: 40 members
About Me:
HAPPY B'DAY TO ME!BLACK FRIDAY!In lieu of a gift, read & rate a review--comments!
|
|
|
© 1999-2009 Shopping.com, Inc.