In July, we wrote about credit card companies who were lowering credit limits on credit cards in an attempt to minimize their exposure to the credit markets. The accounts with lowered credit limits were current with payments being made on time.
Now American Express is aggressively cutting spending limits on consumer accounts and is being quite up front about jut why they are doing it. The reasons may come as a surprise, but apparently this practice has been suspected all along by credit card experts.
Among criteria for reducing spending limits:
- where you live
- where you shop and
- who holds your mortgage
How does this work? For instance, if American Express thinks you have a sub-prime mortgage, or if you live in an area where the percentage of housing foreclousres is high, your account may be red-flagged, even if you are making your payment on time. If you shop at a dollar store or buy something at a rent to own center, you may also be red flagged and targeted for having your limits lowered.
If you are a small business owner without a line of credit who have relied on credit cards to purchase goods and services (such as travel) during the course of normal business, this has a crippling effect.
So is this illegal? Unfortunately not. Credit card companies can lend to whomever they want to lend and they can make whatever rules they want. Unfortunately.
What about you? Have you had a credit card limit lowered?
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Just yesterday I receieved notification that one of my credit card companies was lowering my credit limit. Even though I pay on time, even though I hadn’t used this particular card in quite a while, and even though I pay over the minimum payment, the notification didn’t bother me. In fact, I wish other companies would do the same. Why? Because there are too many people, I used to be one of them, who view available credit as a way of paying bills or buying the extra things they think they need. When I look at how I’ve spent money on a credit card, I often cringe. Where is all this “stuff” I bought? 80 percent of it is long gone. And 90 percent of it wasn’t necessary to begin with. I think we should ALL stop trying to “keep up with Joneses” and live UNDER our means. I’ll let you know how it goes. (ha!)
So is this illegal? Unfortunately not.
You make this statement as if you think it should be illegal — or at least that it is somehow unethical.
To the contrary, banks would be very smart to take these factors into account and should have been doing this years ago.
Face it. The banks have been as dumb as consumers. Consumers in an orgy of gluttony and banks in an orgy of greed.
I’ve been saying for a very long time that credit card debt is a bad deal for everyone — looks like the chickens are coming home to roost. I take no joy in saying how tough it is going to be. I only hope that we as a nation learn something from this fiasco.
About 2 years ago I logged on to check my AMEX account online and it had been red flagged and suspended. Never a late payment with them or any of my creditors, excellent credit, etc. I wondered what was going on and why they did this to me, I was a good customer!!! I called them and they wanted back copies of my tax returns for the last 2 or 3 years or permission to access them, I guess to verify income. Aparently there had been recent unusual spending activity on my credit card account (w/ a 50k limit). Oh I forgot to mention, earlier that month I bought a used car with my amex, no really…. a fairly decent one too at 33k…but paid my balance on the AMEX off the next week. (Hey! I wanted to rack up my reward points! Why not?) And I was 21, lol, so I suppose that did look a tad bit strange to them. I was offended that they were doing this to me, but I can’t say I blame them, I mean it was ridiculous to extend that huge amount of credit to a 21 year old (I had my Amex since I was 18 and it was soley my account and responsibility) I wasn’t an AU on mommy & daddys black card lol. Why on earth they gave me that many credit line increases over a 3 year period doesn’t make sense, I started out witha 2k limit. It was a bad idea on their part to do these account reviews and slash credit limits on their existing “good standing” customers also. I felt like it was a slap in the face, contemplated running up a balance, not paying, and ignoring the phone calls, but ultimately realized that would only hurt me in the long run. I just closed the account and they lost a potential life long customer. Has anyone else had this happen with their AMEX?
I have had Amex Platinum since 1993. During that time I’ve owned 3 businesses and been #2 executive in public company that bought one of them. I’ve charged — and paid timely — over $7 million in aggregate on my platinum accounts. In 2004. when buying an airplane, I had received approval to put $200,000 on it to cover a paperwork delay from the principal financer of the airplane. My net worth is “over $4.5 million” and I draw “in excess of $300K per year from my current company — which has been in operation since 1996 — that I acquired 3 years ago. This week AMEX notified me that my new spending limit is “under $7000″. Five (5) “credit department supervisor” conversations later, one of them finally admitted that not AMEX, but “their bank” is calling the shot on spending limits. And, there is no one who will look past “credit bureau reports”. IMO American Express is a failing company — likely to disappear after they alienate “convenience card users” due to their new “lack of convenience”.
We have always paid our mortgage on time, paid Amex on time for 20 years. What seems manifestly unfair is that we are being treated like credit criminals because of the actions of other consumers. We were just notified that our credit limit had been reduced. Where is the reward for timely, responsible handling of accounts? What this sort of statistic-based prejudice towards customers will do: wean us off of our credit cards–not a bad thing. But once weaned, we’re not coming back. Punishing and humiliating good, loyal, responsible, long-term customers for the defaults of other customers is ridiculous. Some of us aren’t affected by this crisis. We didn’t over leverage our homes, we have great jobs and the same income we had before. Our spending habits haven’t changed, we still handle our account responsibly as we have for 20 years. Your execs have decided it’s smart to treat us like deadbeats. Maybe you should worry more about curtailing your execs.
I spent many years after college building up my credit score so I could buy a house. One of those steps involved opening an AmEx card so the limitless card could improve my debt utilization ratio. I’ve been a good, careful customer, have kept my card largely paid off and did buy my house over the summer.
Shortly after the mortgage was processed, AmEx imposed a limit (they cited my “spending profile” but I didn’t have any weird purchases, so I still don’t understand that). Anyway, I had some charges on the card for stuff for the new house and my upcoming wedding – so the new limit destroyed my debt utilization which made my credit score plummet. Then a couple of months later they lowered the limit AGAIN (citing a lower credit score). When I called to argue the hypocrisy of lowering my credit score and then punishing me for a lowered credit score, the REP started crying and said “at least your new limit is above your balance – they lowered mine $1000 below my balance and I’m getting over limit fees every day. I don’t know what to do!”
I think this is a horrible way to treat good customers. I really do hope they go out of business – would serve these yahoos right.
In my skeptical view of things, not until they get their A…s kicked Royally not unlike the British did in 1776 when they couldn’t devise enough clever schemes by the dozen (stamp duty on private transactions etc.) to sucker the public for revenue. Let’s face it, this industry is just another tax on the working public, ensuring that you are working for them in some proportion or another every day for the rest of your life.
Same BS happened to an otherwise up to this point quite affluent Flight Instructor/Charter Jet Pilot friend of mine. It all started with AmEx and and it had a snowball effect culminating in a short 6-8 month period. He used to charge sometimes in the a amounts of tens of thousands of dollars for aviation fuel, landing fees, hotels, cars etc. throughout his otherwise no spending limit AmEx crads, reaping the “rewards” of points and miles etc. He was getting reimbursed for these costs he laid out in full, within 6-8 weeks by his clients. Well DID AmEx pull a fast one on him. They lowered his otherwise non existent limit without any prior warning or communication by thousands of dollars BELOW (!) the then outstanding balance, causing all the associated over the limet etc. BS fees. My friend being an otherwise old school type fellow, promptly refused to pay these and held back payment until they agree to reverse the BS charges. Well, they never did. And were they arrogant and rude during phonecalls like a Gestapo interrogator. What’s more they kept adding delinquent fees etc. and jacked up 30+ % interest charges. Well, needless to say his credit score that was pretty much catching up on almost 800 took a spiraling-down nosedive, no aviation pun intended. About a month or two later his other creditors wised up and jumped on the bandwagon to pull an AmEx on him. He used to fly for Lehman Bros. on a contract. We all know what happened to them. So, he is still out, holding the bag on that account and right now he is in bankruptcy proceedings. I have known him for the better of the past 15 years. He is the annoyingly meticulous, punctual guy who doesn’t even jump in and start driving his new Audi A8 in the morning before doing a “pre-drive checklist” on it. After the TV character I keep calling him “Monk” for this. I know for a fact that he has never been delinquent or late with ANY of his obligations up to this point, for the past decade and a half I have known him. He just refuses to pay up for a legalized shake down and give up the remainder of his earnings to a legal extortion racket. He rather suffers the effects of a bankruptcy and meantime frantically searches for new jobs even in 3rd world places like India, Malaysia etc. as the domestic airline industry as well as private aviation have all but 100% halted any hiring for the foreseeable future.
Punchline:
I just opened my AmEx mail today. They are putting a $1,000 limit on my previously limitless GOLD (!) Rewards Card. That is $1,000 altogether for all three cards associated with this account. I usually charge around $2,500 a month on it and pay in full when due on time. Thanks God as of now I only owe $600+ on it. But it makes it seem that the credit line is 60+ % utilized. So, Jeez, I wonder what happens next. Especially, to my 760 credit score and what the other creditors kneejerk reaction might be. Do they really expect me to fess up $185 in annual fees for this remarkable product of theirs? Do I really need the work and aggravation associated with a GOLD (!) Card with a $333.33 credit limit per card?! They gotta be freakin’ joking! Outside the US some single foreign currency notes have much higher value than this and they have no problem making change for it at the cashiers without stirring up a bogus anti-money-laundering security BS! They should have just gone the Lehman Bros. way! But yet, another dinosaur is kept on limitless taxpayer life support as a public pet. I just wonder what happens when the taxpayer cannot cough up any more revenue “limitlessly”. Especially, how the job market and real wages are performing these days.
Regards,
Winston
Am Express lowered my limit below my balance. I have never missed a pament, and have always paid over the minimum payment. I have not used the card in over a year and I am just making payments.
this makes me furious. How can this be legal. Now the will start charging me over the limit fees. Once i pay this off the have lost a customer for life.
If this is how they treat their good customers than i hate to see what their doing with their bad ones.
You will no longer have me as a customer and I will tell everyone I know about how horrible you are.
F**K YOU AMERICAN EXPRESS!!!
I have had my AMEX card since 1981, always paid on time and used it regularly for business in excess of $10K/month. Then yesterday I get an automated voicemail saying my new spending limit is $5K. No explaination or call or letter tome “the MEMBER”, just a FU phone message. What if this had come in the middle of a business trip?
Talk about losing a loyal customer!