Methuss

AMEX using "guilt by association" ratings

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By Mike Stuckey

Senior news editor, MSNBC

As the global credit crunch reaches from Wall Street to Main Street, guilt by association has become a tool for evaluating the creditworthiness of American Express customers.

Among other criteria, cardholders are seeing limits reduced because of where they live, where they shop and who holds their mortgage.

Full story here: http://www.msnbc.msn.com/id/27055285

This sort of thing has been speculated on for years, but now AMEX is boldy sending it out in written notices to cardholders that see their rates reduced or interest hiked.

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There is a cure for that crap...Don't get an Amex card and watch them go down too. If everyone did that I bet they would change their attitude quick.

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Their trying to manage their credit quality to prevent their own trip down the rabbit hole. I must say they've done a decent job so far.

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I don't have one. I did have 2 a long time ago. I liked the one where the balance was due at the end of the month, got discount and gas (which is what I used it for) and had more perks. I hated the one that allowed you to carry a balance, cause naturally I used it more than I would have for the basic one and got a larger balance in the end.

I would rather see banks tighten their lending practice with credit cards, not be allowed to give credit cards to college students and make the standard of having a full time job that makes 20 thousand a year a minimum requirement for getting a card.

The industry needs to be brought back down to earth and stop giving credit cards to just anybody. I heard stories of children and pets getting CC offers and one family sent the offer back and got the credit card in "Fido's" name just to see if it could be done. Sure as heck, there was the credit card on the news in "Fido's" name.

Honestly, CC should go back to the old days when only the wealthy could get them and they were only used for emergencies.

Every merchant has a credit card processor but most people doesn't know the merchant has to pay fees with every transaction. I have paypal for an e-bay account and whenever I sell something (doesn't matter for how little) I end up socked with a fee for processing on top of the e-bay listing and selling fees. (2 separate fees for e-bay plus a fee for paypal). Just obnoxious to be billed so many times.

Having a credit card can be like having an addiction. It's easy to pull out that credit card to pay for simple things, some of which you need, when you don't want to go to the bank and get money or if you are waiting for another check (like with part time jobs) and will wait to go to the bank to save gas. It's also easy to use when you don't want to use your debit card because of fees at an atm, ect.

Going credit card free for someone who got used to using them is like going cold turkey. I have to plan out my day more. keep track of how much I am spending on groceries. Know how much cash I have on my person before getting to the check out. Figure out driving distance and how much traveling I will have to do because it was costing nearly 40 dollars to fill up a 10 gallon tank with gas.

I also have to weigh gas cost vrs. what I need. For example, the local grocery store is 3 miles away and has a pretty good selection EXCEPT for produce. Being sugar sensitive, I need to eat a lot of fresh produce or I will get sick. The store with the best selection, quality and price for fresh produce is 25 miles away. So, I can only justify going that far out at 3.80 a gallon of gas (even in a 4 cylinder) once a week. The challenge is making that produce stay fresh for a week or more and avoiding more trips and wasted food. If gas was 1.50 a gallon I could have made that trip twice in a week.

Being credit card free I find myself thinking and at times...Dare I say acting....Like my grandparents. Everything cost too much, can't justify the driving, and I need to double check my wallet before going anyplace.

With the looming credit crunch...Grandma and Grandpa are making a hell of a lot more sense now.:shock:

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I guess my beef is that where you shop, who holds your mortgage and where you live shouldn't be factors.

The where you shop factor is a bit of a privacy issue and isn't a fair assessment. If you shop for clothes for your kids as a Salvation Army store, you get dinged. Actually since children grow so fast this is a smart shopping choice as your kids outgrow the clothes in a few months. Should people be penalized for this sort of smart shopping?

The mortgage factor simply isn't justifiable because they get traded around. You have no control over who is servicing your mortgage and AMEX admits they don't take any of that into account. You could have a prime, low rate, fixed mortgage that has a perfect payment record but will get dinged if you're loan was sold to a low tier company like OCWEN.

The where you live factor is also not something I think can be justified. Just because the surrounding property values have fallen isn't an indicator of your individual risk. A lot of McMansions have been foreclosed on people who couldn't afford it. This policy penalizes those that can afford it that just happen to live in the same area.

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If there weren't corollaries between the identified risk factors and heightened credit risk, then they wouldn't spend the time and money to perform the analysis.

Hey, its their money. And these are behavorial factors. Every credit decision requires discrimination. You need to discriminate based on many factors whether you want to place the companies money (ie bondholder and equity investor money) on the line for this potential customer or withdraw the open credit line and protect the integrity of your bank. Factors such as race and gender are non-behavorial. They're off limits. Other factors are part of the equation.

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touche' - however, once credit has been established - and the consumer has a proven track record, there is no need to reduce CL based on where they live or where they shop. If they wanted to use this as criteria, that decision should have been made before they gave them the CL.

Reducing someone's CL could put them in economic jeopardy by putting them over their limit.

I do pay my CC's on time (and hope to be able to PIF each month - not there yet) - however, 2 months ago (before finding this site), I was at 90% utilization on 2 cards (about 10% total utilization) and this would have been a financial disaster for me if they had reduced my CL. I would not have been able to pay the minimum and then I would go into a default APR.

Through this site, I am a little more educated and am in the process of correcting past mistakes. I am now at 45% utilization on these 2 cards and my goal is to be at 35% at the end of the year.

I honestly do not believe that I should be placed in a group of statistics based on what I purchase or where I live. This criteria does not necessarily represent someone's financial responsibility!

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You may or may not have a factual case about whether withdrawing credit from you based on markers is a good business judgment. But that's the point. It is a business judgment. Its not my money, not your oney, and certainly not Congress' money. Those banks that make wise credit decisons survive. Others that have different risk management practices will likely have a different outcome. Forcing (or more like arm twisting and Congressional browbeating) banks to deviate from their own risk management practices in an effort to promote social goals helped sow the seeds of this mortgage meltdown.

You may think that once you have an open line of credit its your property. Think again. Maybe the bank has a better place to invest their money (after all, all your credit line is to them is a potential ROI or worse, a potential loss). Maybe they don't like you anymore. Who knows. Its the bank's judgment that maters here, not whether they're wrong or right. If they close your line you're certainly free to go elsewhere.

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I guess my beef is that where you shop, who holds your mortgage and where you live shouldn't be factors.

The where you shop factor is a bit of a privacy issue and isn't a fair assessment. If you shop for clothes for your kids as a Salvation Army store, you get dinged. Actually since children grow so fast this is a smart shopping choice as your kids outgrow the clothes in a few months. Should people be penalized for this sort of smart shopping?

The mortgage factor simply isn't justifiable because they get traded around. You have no control over who is servicing your mortgage and AMEX admits they don't take any of that into account. You could have a prime, low rate, fixed mortgage that has a perfect payment record but will get dinged if you're loan was sold to a low tier company like OCWEN.

The where you live factor is also not something I think can be justified. Just because the surrounding property values have fallen isn't an indicator of your individual risk. A lot of McMansions have been foreclosed on people who couldn't afford it. This policy penalizes those that can afford it that just happen to live in the same area.

I’m a bit surprised that you would take that position.

I hold American Express (as I do Visa, MC, Discover, etc) in very low regard but they do have a right to decide who they will and will not extend credit to and at what rate as well as to reevaluate their decisions as many times as they wish using whatever criteria they wish. Whether or not the criteria being used for their reevaluation seems logical or appropriate is somewhat immaterial - the only way we can "vote" is to choose to not do business with American Express.

I think we need to remember that people are not “entitled” to credit from anyone, even if they have a “perfect” credit history – if American Express believes that measuring factors will allow them to reduce their risk then I see nothing wrong with it.

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This is definitely akin to a clean well dressed guy who is broke, versus a bummy, kinda dirty guy with a whole lot of cash.

If I'm a bank and I don't know either of these folks' financial situations and had to guess by appearance, yeah, I'm going to bet on the clean, well dressed fellow to give my loan to. Not knowing that I just placed my bet on the wrong horse.

Amex is pretty much doing the same thing. In college, I was offered an AMEX card and got denied because my college had a history of high defaults (and no doubt, I'd have been one of them, though I was still a bit shocked they wouldn't give me a chance with that). So this really isn't surprising to me that AMEX would pretty much discriminate like that just so cover their butts.

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I don't have one. I did have 2 a long time ago. I liked the one where the balance was due at the end of the month, got discount and gas (which is what I used it for) and had more perks. I hated the one that allowed you to carry a balance, cause naturally I used it more than I would have for the basic one and got a larger balance in the end.

I would rather see banks tighten their lending practice with credit cards, not be allowed to give credit cards to college students and make the standard of having a full time job that makes 20 thousand a year a minimum requirement for getting a card.

The industry needs to be brought back down to earth and stop giving credit cards to just anybody. I heard stories of children and pets getting CC offers and one family sent the offer back and got the credit card in "Fido's" name just to see if it could be done. Sure as heck, there was the credit card on the news in "Fido's" name.

Honestly, CC should go back to the old days when only the wealthy could get them and they were only used for emergencies.

Every merchant has a credit card processor but most people doesn't know the merchant has to pay fees with every transaction. I have paypal for an e-bay account and whenever I sell something (doesn't matter for how little) I end up socked with a fee for processing on top of the e-bay listing and selling fees. (2 separate fees for e-bay plus a fee for paypal). Just obnoxious to be billed so many times.

Having a credit card can be like having an addiction. It's easy to pull out that credit card to pay for simple things, some of which you need, when you don't want to go to the bank and get money or if you are waiting for another check (like with part time jobs) and will wait to go to the bank to save gas. It's also easy to use when you don't want to use your debit card because of fees at an atm, ect.

Going credit card free for someone who got used to using them is like going cold turkey. I have to plan out my day more. keep track of how much I am spending on groceries. Know how much cash I have on my person before getting to the check out. Figure out driving distance and how much traveling I will have to do because it was costing nearly 40 dollars to fill up a 10 gallon tank with gas.

I also have to weigh gas cost vrs. what I need. For example, the local grocery store is 3 miles away and has a pretty good selection EXCEPT for produce. Being sugar sensitive, I need to eat a lot of fresh produce or I will get sick. The store with the best selection, quality and price for fresh produce is 25 miles away. So, I can only justify going that far out at 3.80 a gallon of gas (even in a 4 cylinder) once a week. The challenge is making that produce stay fresh for a week or more and avoiding more trips and wasted food. If gas was 1.50 a gallon I could have made that trip twice in a week.

Being credit card free I find myself thinking and at times...Dare I say acting....Like my grandparents. Everything cost too much, can't justify the driving, and I need to double check my wallet before going anyplace.

With the looming credit crunch...Grandma and Grandpa are making a hell of a lot more sense now.:shock:

Now if Fido is dutifly employed say as a guard dog,a companion,baby sitter,shouldn't he/she be rewarded with the petsmart credit card?
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Now if Fido is dutifly employed say as a guard dog,a companion,baby sitter,shouldn't he/she be rewarded with the petsmart credit card?

There is a difference between "dutifly (sic) employed" and gainfully employed.

If Fido can't pay his own bills, he has no business with a Petsmart card.:lol:

Goldbug:mrgreen:

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I guess my beef is that where you shop, who holds your mortgage and where you live shouldn't be factors.

The where you shop factor is a bit of a privacy issue and isn't a fair assessment. If you shop for clothes for your kids as a Salvation Army store, you get dinged. Actually since children grow so fast this is a smart shopping choice as your kids outgrow the clothes in a few months. Should people be penalized for this sort of smart shopping?

The mortgage factor simply isn't justifiable because they get traded around. You have no control over who is servicing your mortgage and AMEX admits they don't take any of that into account. You could have a prime, low rate, fixed mortgage that has a perfect payment record but will get dinged if you're loan was sold to a low tier company like OCWEN.

The where you live factor is also not something I think can be justified. Just because the surrounding property values have fallen isn't an indicator of your individual risk. A lot of McMansions have been foreclosed on people who couldn't afford it. This policy penalizes those that can afford it that just happen to live in the same area.

But where you live also influences other things, like car insurance, home owner's insurance and property taxes.

It's not right but it's life. 88-)

Did you know that when you walk into a room filled with strangers, opinions are made about you based on your physical appearance in the first 10 seconds?

Profiling isn't just racial! It's a very basic human tendency to make judgments based on limited information.

Discrimination?

AKA Profiling.

Now if Fido is dutifly employed say as a guard dog,a companion,baby sitter,shouldn't he/she be rewarded with the petsmart credit card?

LOL...I think Fido would rather be paid in dog treats.

There is a difference between "dutifly (sic) employed" and gainfully employed.

If Fido can't pay his own bills, he has no business with a Petsmart card.:lol:

Goldbug:mrgreen:

Petsmart? But Fido got a visa from a major company....LOL. 8-)

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This thread bears a strong resemblance to one of the monster argument threads.......:lol:

Honestly, CC should go back to the old days when only the wealthy could get them and they were only used for emergencies.

What? Jackie say it isn't so! Only the wealthy deserve to have credit extended to them? I'm what you would probably call "lower middle class," but probably more deserving of a decent credit card than the rich punk pulling out his American Express while buying the latest and greatest gadget.

And I'm actually with somebody else who said this could be borderline discrimination, depending on how far they actually go. Think about it.

I know in my town there is the "north side" and the "south side." The south side of town is where alot of minorities reside and if somebody who lived on that part of town had an AE and they sent them a letter saying, "Excuse me Mr. Southside, but because you live in a poor part of town, we have decided to raise your rate." Despite the fact that some of the most extravagant, beautiful, and historic homes are located on the south side of town. I'm just saying that this is a lawsuit brewing.

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But where you live also influences other things, like car insurance, home owner's insurance and property taxes.

But the way that where you live influences those things is not the same as what we're talking about here. Where you live has bearing on your insurance because of crime rates and for mother nature related reasons. They want to know how likely it is that your car will be stolen or vandalized in the middle of the night or whether the next Ike is going to blow you away. You might know that sometimes auto and home theft rates are higher in affluent areas, not just around us lower class folks. :lol:

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...What? Jackie say it isn't so! Only the wealthy deserve to have credit extended to them? I'm what you would probably call "lower middle class," but probably more deserving of a decent credit card than the rich punk pulling out his American Express while buying the latest and greatest gadget.

No on "deserves" credit be it in the form of CC or a mortgage or anything in between.

However, those with a proven track record of being able to handle credit, and for that matter; the rest of their financial lives, enough income, etc, should be the ones who have credit extended to them if credit is available and if those people desire it...those who don't have their financial house in order/have shown a problem with handling credit and/or don't have the income shouldn't have extended credit extended to them.

This is not the first thread dealing with this kind of issue (remember the "lifestyle" thread)...I can't help but wonder if major credit grantors are starting to utilize other methods of measuring risk because enough people have started to re-write their credit histories to the extent that lenders are starting not to trust credit histories???

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No on "deserves" credit be it in the form of CC or a mortgage or anything in between.

However, those with a proven track record of being able to handle credit, and for that matter; the rest of their financial lives, enough income, etc, should be the ones who have credit extended to them if credit is available and if those people desire it...those who don't have their financial house in order/have shown a problem with handling credit and/or don't have the income shouldn't have extended credit extended to them.

That's what I meant Robert. I am just as deserving.....or just as worthy or just as meritable or however you want to say it.

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There is a difference between "dutifly (sic) employed" and gainfully employed.

If Fido can't pay his own bills, he has no business with a Petsmart card.:lol:

Goldbug:mrgreen:

Ok net time i'll use spell check.However i'd point out their are some dogs that are richer than all of us put together.they were left a bundle.

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When wealthy people use credit, 9 times out of 10, they use it to increase their wealth.

When "lower middle class" folks (and I am pretty proud to be a part of that class) use credit, it's to pretty much borrow against the future, even for a short time. We don't try to get wealthy, we just borrow against ourselves (and hopefully without interest).

I don't agree that only the wealthy should be extended credit, but I do agree that folks responsible enough to use credit should have it.

I never wanted the credit in my sig. I only have it so that I can get a house. If I so wished (and I don't), I can close every TL right now after I pay off whatever balance right now and go back to good ol' cash. But, I want a house. I also want to use that house to remove "lower" from my middle class status and perhaps have a personal net worth of at least lower 6 digits.

One of the things I like about this place, is that everyone is so diverse. I don't really care about the cultural diversity (unless of course we're talking about the region of the country you're from, then that plays a small part), but educational and economic diversity. The opinions I read here (whether I agree with them or not) makes this both entertaining and educational. That to me is truely....priceless. :lol:

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When wealthy people use credit, 9 times out of 10, they use it to increase their wealth.

When "lower middle class" folks (and I am pretty proud to be a part of that class) use credit, it's to pretty much borrow against the future, even for a short time. We don't try to get wealthy, we just borrow against ourselves (and hopefully without interest).

Okay AA if you're "lower middle class" then I am definitely "lower class." :lol:

I don't even pull in 36k a year for a household of 3.

But I have always thought of myself as "lower middle class," because I know alot of people who have it way worse than I do. Which is why I try not to complain too much. I'm actually pretty blessed. :)

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When wealthy people use credit, 9 times out of 10, they use it to increase their wealth.

Whoa there. That is almost completely untrue.

If you read Forbes, or Money Magazine, or Smart Money when they interview people who have a net worth over $10MM, nine out of ten of the wealthiest people in the world say that the number one step to becoming and staying wealthy is to become and stay debt-free. Rich people that have stayed rich don't carry balances on credit. They understand early on that if your are not paying interest on money you are earning it.

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people who have a net worth over $10MM

Okay so is this how we are defining wealthy these days? 10 million in networth? Dang I would think I "made it" if I could pull in just 100k a year! :lol:

Seriously, I'm not one of these high maintenance chicks who spends a grand a month on highlights and shoes. I could live a very comfortable lifestyle at even just 40k a year.

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Okay AA if you're "lower middle class" then I am definitely "lower class." :lol:

I don't even pull in 36k a year for a household of 3.

But I have always thought of myself as "lower middle class," because I know alot of people who have it way worse than I do. Which is why I try not to complain too much. I'm actually pretty blessed. :)

I think I am in your boat too Deanna...I barely make 38 a year lOL...I have 3 kids too, :mrgreen:

AA KUDOS for sticking up for Blue collar workers LOL Thats what I will be till I die LOL Yeah this place is pretty diverse, I like that too. :-):mrgreen:

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