American Express Membership Rewards - Credit Line Reduced - Member since 1986

AMEX today reduced my Blue Card, Credit Line by $ 10,000 leaving available credit of $ 1,500.00 and a just two weeks ago cancelled my Gold Card in error. Is this a result of my asking to have the Gold Card annual fee reduced for the upcoming year? Is American Express getting tough even with their good customers?

The member since date means very little in determining if one is a good customer, FWIW.

I don't know what other details your credit report would reveal or what actually triggered the reduction in the credit available, but it definitely had nothing to do with you having been a cardholder for 20 years.

AMEX today reduced my Blue Card, Credit Line by $ 10,000 leaving available credit of $ 1,500.00 and a just two weeks ago cancelled my Gold Card in error. Is this a result of my asking to have the Gold Card annual fee reduced for the upcoming year? Is American Express getting tough even with their good customers?

There are other area's of customers profile that trump tenure when banks and credit card companies look at there customers. I often hear this tenure comment way too much from customers [i.e. "I have been with your company since 1975"] in my own industry, and though I value their loyalty sometimes that's not enough when they cost me more than they spend/provide or when they become a risky customer by paying late, or being belligerent, or continually asking for additional items for free or wanting more discount, and a host of other reasons when they spend $1 and ask for $5 worth of value but use the tenure comment when we push back. Over time that model leads to business ruin.

Not that this is your situation!

I myself have been with AMEX since '94 and check everyday expecting my CL to be reduced based on everyone else's comments here but it hasn't happened yet on either of my 40k HH or 44k SPG. MY Plat hasn't been given a hard CL either yet. When/If it does happen I'll probably feel the same way as you initially but I'll get over it because it's a sign of the times and I have had a very good relationship with Amex up until that point [if it ever happens].

I disagree on tenure. In particular Am ex touts member since date. If someone has a credit card open the company is making money plain and simple. If the customer was not paying the credit card company would close the accounts not reduce the credit line. What is disturbing is the United States Government has given these companies extremely cheap money to lend. Amex got permission to be a bank in the blink of eye and rules were waived. If the OP said he was not making his paments on time etc I could understand. Unfortnately this is what really is going on: The credit card markets are looking at any area of the country like Phoenix Arizona and peg it as decline in value home market and will look for any reason to lower credit lines. My credit line on one card is higher than yours combined and I also expect amex to chop it any day even though I pay in full every month and never ever late and have no home mortage on my primary residence just because I live in Arizona

well, you're way behind the curve on what's happening with AMEX downgrading accounts, doing IRS financial inquiries, etc.

Go over to the credit boards for an earfull on AMEX crap:

http://creditboards.com/forums/index.php?&showforum=2

Amex is in big trouble. They have no deposit base and their access to securitization of their credit card receivables has disappeared. They are in a vicious cycle of cutting customer credit lines, which reduces transaction volume from merchants, reducing their profits and capacity to absorb losses, which leads to further cuts in consumer credit limits, etc. Their travel business has got to be hurting also.

I disagree on tenure. In particular Am ex touts member since date.

That is a marketing thing. I do not believe it has anything to do with how credit is allocated; certainly no more than it does with every other credit provider, none of which focus on that as a marketing tool.

My experience has been that the only bank which gives heavy weight to longevity of their customer relationship has been Citi. They have not cut any lines for us, my wife has been a customer for like 25 years. Amex is almost on par with HSBC, in the lowest tier, "subprime issuer".

Amex cut the limits on my cards last week. Based on what I've heard, I'm not taking it personally. I've also been with them for a long time and always paid on time.

Is there any rhyme or reason that anyone knows of for the cuts?

Like, anything specific to avoid doing aside from the obvious being late or going over?

We have 10k on an Optima card that is a sort of an emergency fund that may need to get used in the next year - and it'd be a real pisser to lose it, especially if we need to use it.

Our corporate card was recently cut from 90k to about 50k and we have never been late. An ounce of prevention I guess, although our corp is doing well.

It's business. I don't take it personal.

We have 10k on an Optima card that is a sort of an emergency fund that may need to get used in the next year - and it'd be a real pisser to lose it, especially if we need to use it.

Credit cards are not the same thing as emergency funds. At least they shouldn't be.

We have 10k on an Optima card that is a sort of an emergency fund that may need to get used in the next year - and it'd be a real pisser to lose it, especially if we need to use it.

That's one thing that I think has changed as a result of the credit crisis, at least for me. I used to consider having an available credit line as my "emergency fund" that people often recommend that you have, to cover living expenses for 3-6 months should something happen at work, for example. But these days, one can't really rely on a credit line being available going forward, even if your personal credit situation is okay. The bank could be in trouble instead of you. Also, in the event of a major national issue, such as the current credit crisis, you may end up needed the money yourself for the same root cause that the banks are unwilling to lend it in large amounts. Going forward, I think it's going to be "cash is king" as far as emergency money goes.

Going forward, I think it's going to be "cash is king" as far as emergency money goes.

It always was. Folks who using credit for such situations are often ones who default, as by the time you get to needing the emergency money you're likely to be in a position where paying it back - with the overwhelming interest - is less likely to happen. That is a bad way to operate (either personally or from the CC providers' perspective) over a long term and when derivatives and other fun things start happening you find yourself in a situation where some folks made a lot of money and the rest of us are hosed.

I could be wrong and may be proven wrong in this thread, but are most of the credit lines being cut related to the PLUM card ? Would make sense to me if so, because of the Plum feature to carry a balance an extra month with no interest (in a time where AMEX can ill-afford to carry a substantial balance for an extra month), versus (say) SPG or HHONORS AMEX which are true credit cards...and will accrue interest for AMEX if one carries a balance.

Without doubt, the PLUM card is not suited to this economic environment.

I have four or more AMEX products - CENT, spg (one my name, on my spouse's), HHONORS, and so far none have been cut that I am aware.

I could be wrong and may be proven wrong in this thread, but are most of the credit lines being cut related to the PLUM card ?

I do not think so. The folks posting here seem to be mentioning a broad range of AmEx products, not just Plum.

My credit lines have actually been increased recently by AmEx without any request on my part. Go figure.

Credit cards are not the same thing as emergency funds. At least they shouldn't be.

+1.

My credit lines have actually been increased recently by AmEx without any request on my part. Go figure.
Me too! Was really suprised since I never reached the previous limit amounts. I had an increase to my HH and SPG AMEX within the last couple of months. And CITI and ML raised my limits on their cards too.

Regarding Plum, it gives you only 15 days more than a regular charge card interest free, and does not earn MR points. I would guess that the extra 15 days of float is actually cheaper to Amex than MR points if the points are transferred to a partner airline.

Regarding Plum, it gives you only 15 days more than a regular charge card interest free, and does not earn MR points. I would guess that the extra 15 days of float is actually cheaper to Amex than MR points if the points are transferred to a partner airline.

The REAL advantage of the Plum is the 2% pay early discount for high cost inventory buyers, not the 15 more interest free days.

If you can't take advantage of the 2% early pay discount, the Plum is not a good card. But if you spend $100k-$1mil/month in inventory and can pay early, you're going to be able to have a good cut on your competitors in terms of cost/profit.

It seems Amex and other CC companies are separating, even further, their good customers from their bad customers. Some are getting credit increases, others decreases. I was surprised recently when an Amex supervisor was gushing on the phone about how much they appreciate my business and the fact that I always pay my bill on time in in full.

It seems Amex and other CC companies are separating, even further, their good customers from their bad customers. (...)

Interesting is that until recently a great customer was one that would not pay bills in full... The ones paying in full at the end of each cycle were known as not so interesting customers.

Nowadays great customers are the ones paying in full while the previous high-yield customers are now considered a problem in the balance sheets...

The member since date means very little in determining if one is a good customer, FWIW.


And that's exactly the problem with their current way of doing business.

And that's exactly the problem with their current way of doing business.
:confused:
How do you figure? They use "member since" for marketing and actually make business decisions based on business models/metrics.

My Delta Optima card was reduced from 10K to $500/= and SPG card from 7K to $500/=.

I understand that they have done this becuase of their economic situation not mine, as I have paid on time, no delays, decent usage, long time customer and annual fee paying guy..

I was frustrated as my charges avg around $1500/= per month. This is what I did.

- Delta Optima (Annual fee $150/= i think) => I reduced it to plain Optima Select with no annual fees. (dont care abt the points with just $500 limit) and asked them to payback my annual fees (prorated)

- SPG, I like spg, so I have been replinishing regularly before the $500/= gets used over and asked them to review and increase to some decent levels.

Lets see what will happen.. Working for a wallst firm, I am losing complete faith in these banks to be of any good to avg person.

Regards,

My Delta Optima card was reduced from 10K to $500/= and SPG card from 7K to $500/=.

I understand that they have done this becuase of their economic situation not mine, as I have paid on time, no delays, decent usage, long time customer and annual fee paying guy..

I was frustrated as my charges avg around $1500/= per month. This is what I did.

- Delta Optima (Annual fee $150/= i think) => I reduced it to plain Optima Select with no annual fees. (dont care abt the points with just $500 limit) and asked them to payback my annual fees (prorated)

- SPG, I like spg, so I have been replinishing regularly before the $500/= gets used over and asked them to review and increase to some decent levels.

Lets see what will happen.. Working for a wallst firm, I am losing complete faith in these banks to be of any good to avg person.

Regards,

Have you checked your credit score? Any significant changes? I am just curious. With $500 credit line one cannot do much now days.

My Delta Optima card was reduced from 10K to $500/= and SPG card from 7K to $500/=.

I understand that they have done this becuase of their economic situation not mine, as I have paid on time, no delays, decent usage, long time customer and annual fee paying guy..

I suspect this does have something to do with your financial situation. Of course you're right to say that most of what Amex has been doing recently in terms of reducing credit lines for people that have good payment histories has been triggered by their own financial problems. But consider that if they reduced every customer to a $500 credit limit - they'd be out of business in short order.

It sounds like a $500 limit is just one step ahead of closing your accounts altogether - it sounds like they are not comfortable with very little exposure from you. Despite your on-time payment history with Amex, is there anything on your credit report that would make them nervous?

'....Lets see what will happen.. Working for a wallst firm, I am losing complete faith in these banks to be of any good to avg person. "

If I a am reading this correctly, he works on wall street, and maybe AMEX is targeting his employer as risky or his employment as being at risk and hence AMEX reduced his credit lines.

'....Lets see what will happen.. Working for a wallst firm, I am losing complete faith in these banks to be of any good to avg person. "

If I a am reading this correctly, he works on wall street, and maybe AMEX is targeting his employer as risky or his employment as being at risk and hence AMEX reduced his credit lines.

I'm reading it the same way.

When people say "I always pay on time..." are you saying you pay your FULL balance on time? Or simply that you pay what is due on time? I have a charge card so I really only go by the "pay in full" definition. That could have something to do with them lowering your limits.

Although if they lowered your limit to $500 my guess is that you paid in full

Have you checked your credit score? Any significant changes? I am just curious. With $500 credit line one cannot do much now days.

How about making an overpayment to your account - with $500 limit fully used, making a payment of $1500 would get you $1500 to reach your limit again. Doing this repeatedly for a few months might make the card company rethink your credit limit.

When people say "I always pay on time..." are you saying you pay your FULL balance on time? Or simply that you pay what is due on time? I have a charge card so I really only go by the "pay in full" definition. That could have something to do with them lowering your limits.

Although if they lowered your limit to $500 my guess is that you paid in full

Why wouldn't they reduce credit lines that are paid in full monthly - which don't garner interest payments and yet use reward programs? It seems like the most likely financial choice for them - people who charge and can charge more while holding a balance are paying them more in interest. The folks who pay it off are giving them nothing but Amex has to pay out for card rewards.

The folks who pay it off are giving them nothing but Amex has to pay out for card rewards.

:confused: Uh, doesn't AmEx make money off the merchant fees? I heard that AmEx's fee is highest compare to Visa, MC and Discover.

How about making an overpayment to your account - with $500 limit fully used, making a payment of $1500 would get you $1500 to reach your limit again. Doing this repeatedly for a few months might make the card company rethink your credit limit.

They might or might not. It all depends on an original reason to decrease a credit limit. For example if they think you have to much exposure for the income you have reported on your original application, they might not change it until you can prove your income has been increased.

:confused: Uh, doesn't AmEx make money off the merchant fees? I heard that AmEx's fee is highest compare to Visa, MC and Discover.

Yes they do and then pay for our rewards :)

:confused: Uh, doesn't AmEx make money off the merchant fees? I heard that AmEx's fee is highest compare to Visa, MC and Discover.

Well, merchant fees and interest is definitely more money then merchant fees alone - and the real question becomes which is higher? Merchant fees or interest? I'm going to say on a transaction per transaction basis it's going to be interest.

When people say "I always pay on time..." are you saying you pay your FULL balance on time? Or simply that you pay what is due on time? I have a charge card so I really only go by the "pay in full" definition. That could have something to do with them lowering your limits.

I always pay the full balance on time on all my cards. They keep raising my limit, perhaps hoping I will overspend and not be able to pay it off?

Well, merchant fees and interest is definitely more money then merchant fees alone - and the real question becomes which is higher? Merchant fees or interest? I'm going to say on a transaction per transaction basis it's going to be interest.

Well - to my knowledge, American Express has merchant fees towards the high end. What I found with respect to the US is that fees are above 2% (see http://www.usatoday.com/money/perfi/general/2004-12-22-amex_x.htm ) and I suspect that in other countries it may be higher. If you get an average of 30 days of cardholder financing without interest against that 2%, it is equivalent of approximately 24% APR. I would call that good business.

Just as a FYI, American Express does not even offer "real" credit cards in many parts of the world. I have a Platinum card from Finland, and the balance has to be paid out in full every month, even though the card has no usage limit per se. With this policy, American Express is making absolutely no money from cardholder interest payments, and yet it seems to be a very profitable business.

(...) With this policy, American Express is making absolutely no money from cardholder interest payments, and yet it seems to be a very profitable business.

Nowadays it's important not only to be in a very profitable industry but mainly low risk and highly predictable revenues.

The latest two are achieved through wealthy customers willing to spend and pay in full at the end of each month, as Amex started their business with their charge cards.

Lending to customers not paying in full, regardless of financial history, was trendy in an environment looking for higher yields regardless of the risk incurred to achieve them.

Nowadays where AAA corporate bonds yield double digit returns, why bother lending to eventual subprime customers?

The latest two are achieved through wealthy customers willing to spend and pay in full at the end of each month, as Amex started their business with their charge cards.

Paying in full at the end of the month is not an indication of wealth. It is an indication of responsibility.

How about making an overpayment to your account - with $500 limit fully used, making a payment of $1500 would get you $1500 to reach your limit again. Doing this repeatedly for a few months might make the card company rethink your credit limit.
Playing that game with AMEX will just get you FR.

Why wouldn't they reduce credit lines that are paid in full monthly - which don't garner interest payments and yet use reward programs? It seems like the most likely financial choice for them - people who charge and can charge more while holding a balance are paying them more in interest. The folks who pay it off are giving them nothing but Amex has to pay out for card rewards.

That is the exact opposite of how AMEX thinks. Amex like it when customers PIF. They perfer to make their money on annual fees, and merchant charges. The AMEX taget consumer who can PIF , which is my guess as to why they are begining to favor Charge Cards once again.

Well, merchant fees and interest is definitely more money then merchant fees alone - and the real question becomes which is higher? Merchant fees or interest? I'm going to say on a transaction per transaction basis it's going to be interest.And attracting a clientele that cannot PIF and carries balances also poses a greater RISK. So no it is not simply a function of which is higher, merchant fees or interest. It is a function of which is higher combined with their risk tolerance. Amex has traditionally favored customers who PIF, there are other carriers who opperate as you described above, but not Amex.

Wow, I read this thread a few days ago and was amazed at how the posts on this board were discussing someone's credit score as the reason why credit lines were being reduced. It has been all over CNBC and MSNBC, in the New York Times, Washington Post and Wall Street Journal. All banks will be lowering credit card lines in the coming weeks and months, they start a couple of months ago. I was just happy that my lines remained unchnaged.

Until tonight. I received a call from AMEX (automated, can you believe the nerve). The voice system asked me if I were Mr. _____, and if so press 1. When I pressed 1 it said we have an important message about your account and gave the last 5 digits. It indicated that after a review, the limit had been reduced, effective immediately, to $29k (from $50k). I have not used this card in 2 years, but kept it open because it is one of the oldest accounts on my credit file - over 20 years. Minutes later I recived another call from AMEX indicating that the limit on my CLEAR had been reduced to 65k (from 100k). I carry a balance on this card at 1.99% - so the reduction should in line lowers the cushion between balance and available credit (which could lower my very high credit score slightly). I went on line to check my account status, and noticed that the lines for the two cards I had recieved a phone call about did not reflect the change online, but my final 3rd card with AMEX (other than a PLT used for business expenses) a SPG AMEX, indicated the line had gone to 46k from 80k. Again no balance on this account.

I have never paid any account late in my life, have excellent credit, do not work on Wall Street, own my apratment and have substnatial other lines from other banks.

While I have substanital savings, I too felt comfortable knowing that I had hundreds of thousand of dollars of credit avail if something happened. While I don't like the way AMEX went about lowering my lines, I do think it makes good business sense for them to start closing down some of this outstanding credit. My risk to them (even though I understand I am low risk) was in excess of $250k. Why carry that risk. In fact, they never should have given me such high lines in the first place.

Not proofread, sorry for typos.

I have Plat, Blue and (had) SPG. About a month ago Amex cut my limit on Blue and SPG to just above the balance. I chose to cancel SPG at that point because of the fee. When I called to cancel, the agent was very nice and said something to the effect that it wasn't personal, it was happening to everyone. When I got the letter from Amex with the reasons, one of the reasons was because my car loan was with a bank where there had been many defaults. That fails to take into account that this was my second loan with this bank (first paid perfectly) and was 2 months from being paid off.

I too had my credit lines reduced on 3 Amex cards. I fully understood why this was happening, but what really ticked me off was the explanation:

- my payment history (I've never once been late)
- my length of time as a customer (I've been a customer since 1989)

My credit card usage has shifted to a Citi card because of this.

Hope for those who have been reduced: http://creditboards.com/forums/index.php?showtopic=376336

Hope for those who have been reduced: http://creditboards.com/forums/index.php?showtopic=376336

Thanks for providing a link to this thread. I guess there is a way to restore credit lines for people that got them reduced.

:confused:
How do you figure? They use "member since" for marketing and actually make business decisions based on business models/metrics.

What do you mean 'how do I figure'?

You don't think the fact that a customer has done business with you for over 23 years without interruption, and has never missed a payment, never stiffed you, etc., just MIGHT be a better risk indicator than some crackpot numerical score cooked up and sold to you for a profit by some self-interested third-party (Fair Isaac)?

If you don't see a problem with doing business like that, then I would suggest some reading on the fallacies of statistical modeling. The Black Swan should get you started. It's all quack science. You can't predict the future from the past, it's mathematically impossible. Yet, as a society, we are absolutely fascinated with doing exactly that.

Amex is hassling customers of 23 years for, essentially, no reason. It's ridiculous, and their bottom line is going to show it.

What do you mean 'how do I figure'?

Amex is hassling customers of 23 years for, essentially, no reason. It's ridiculous, and their bottom line is going to show it.

Actually, they have a pretty good reason: the market where they collateralize their debt disappeared, virtually overnight. So, for a 2-3 month period, they largely had no money to lend. Faced with this, what would you have done? They had to cut off someone, so the lower half (two thirds?) of their customer base logically would be the most prudent place to start. This makes sense to me because the reductions, in most cases, seem to only have impacted their credit card lines/business. Charge (net 30) were not impacted.

That "crackpot" score, uses total credit utilization and amount owed to everyone as an integral part of its makeup. I think it is a pretty good indicator of how extended someone is. Loyalty goes a long way, but a solid financial profile goes a lot further.

It will be interesting to see if they tighten up again when their TARP money is gone. All depends on the commercial paper market, I guess.

Well - to my knowledge, American Express has merchant fees towards the high end. What I found with respect to the US is that fees are above 2% .....


Well, yeah. You'd be lucky to get Visa/MC merchant rates at 2% (this is possible btw, but it takes some shopping around). Amex typically now chares above 3%. It is possible to get it down to around 2.5%, but requires millions and millions in volume, a physical store front, and additional security data capture. your average retailer will not qualify.

If you don't see a problem with doing business like that, then I would suggest some reading on the fallacies of statistical modeling. The Black Swan should get you started. It's all quack science.

Might I then, suggest you do some reading on just statistics? It is ironic that you bring up the Black Swan, because it both A) says that you can do statistical modeling in situations like credit card debt, and B) that it recommends extra precautions for situations with statistical outliers.

B) is what Amex is doing, since traditional statistical modeling will tend to underestimate their credit risk in an environment like today's. So they are tightening even where past history hasn't always suggested there may be a problem.

The funny thing about the A) argument is that people on this board always assume Amex is doing the wrong thing based on their individual experience, whereas Amex is basing their decisions on aggregate information.

Look, I'm not saying Amex is perfect. Heck, I am pretty sure even Amex says they're not perfect. And they likely know they will be breaking some eggs this way, but hope to avoid more credit losses than the revenue they lose from pi$$ing of good customers.

What's the alternative? Apply a credit scoring model based length of customer relationship and # of late payments? I don't think so. However, it also sounds like Amex is mismanaging the implementation of their new credit policies by not explaining what is going on, and by having no trainign for their reps in explaining dealing with irrate customers.

LTZ

It's definitely an odd world right now. I have well over $100K in credit lines with AMEX. They lowered my limit on one card $6000.

Not long after, I moved some money to HSBC and applied for the Premier card, and got a credit limit of $31K. Go figure.

It's definitely an odd world right now. I have well over $100K in credit lines with AMEX. They lowered my limit on one card $6000.

Not long after, I moved some money to HSBC and applied for the Premier card, and got a credit limit of $31K. Go figure.

HSBC is a bank. They have depositors buying CDs.

Amex has...the government.

[QUOTE=chriswufgator;11008605]What do you mean 'how do I figure'?

You don't think the fact that a customer has done business with you for over 23 years without interruption, and has never missed a payment, never stiffed you, etc., just MIGHT be a better risk indicator than some crackpot numerical score cooked up and sold to you for a profit by some self-interested third-party (Fair Isaac)?

You can't predict the future from the past, it's mathematically impossible. Yet, as a society, we are absolutely fascinated with doing exactly that.

QUOTE]

I hope that you see your contradiction here. You are saying that you HAVE done (as in past tense) business with AMEX for 23 years without interruption. Yet they should not predict the future from the past. Therefore they should NOT care about the 23 years they had with you and worry about what they believe your situation (as well as others) is now.

Look I'm not happy with the stories I hear about AMEX either, but they are doing what they have to in order to survive this mess. That's all I can think of for now.

Amex cut my limits on Blue ($22K to $1000) and Starwood ($10K to $500) making the cards pretty much useless. I truthfully can't say I blame them since my report does make me look like a risk. I have a bunch of new accounts, I have accounts with high balances near my credit limit and I make the minimum (or close to it) payment every month on these accounts.

Nowhere does FICO show that these accounts are 0% balances, and I got a ton of reward points for opening new accounts. One or two late payments also show on my report from 6.5 years ago, so those got mentioned in the letter too.

I do find it odd that they would take a travel based card like the Starwood and slash the limit so low. Chase just notified me they are cutting my limits, but still left me with plenty of credit. Neither will hurt me in the long run, and I'm still profiting by playing the games - just a little less profit now. Starwood was going to be cancelled anyway. I'll keep the blue since it is no annual fee and might be useful again some day when credit thaws.

Slashing your limits is a lot different than closing your account. Assuming your finances improve in 3-6-12-24 months, they can always raise them again. If they close you, you're gone forever.

Actually, they have a pretty good reason: the market where they collateralize their debt disappeared, virtually overnight. So, for a 2-3 month period, they largely had no money to lend. Faced with this, what would you have done? They had to cut off someone, so the lower half (two thirds?) of their customer base logically would be the most prudent place to start. This makes sense to me because the reductions, in most cases, seem to only have impacted their credit card lines/business. Charge (net 30) were not impacted.

That "crackpot" score, uses total credit utilization and amount owed to everyone as an integral part of its makeup. I think it is a pretty good indicator of how extended someone is. Loyalty goes a long way, but a solid financial profile goes a lot further.

It will be interesting to see if they tighten up again when their TARP money is gone. All depends on the commercial paper market, I guess.

Well I think you may have hit the nail on the head. They may be having their own funding issues, and are probably cutting back lines across the board because they would otherwise be unable to maintain the reserves required to service the total of their outstanding lines based on predicted customer drawdowns, especially when they can't place overnight paper. The computer-generated responses people get when their accounts are closed or their credit limits reduced are mainly designed to comply with the FCRA, and aren't designed to disclose the corporate strategies behind lending policies. So I think people are seeing the trees, but not the forest. I do think you're right about the root of their decisions being based on their own financial situation.

But if by some chance that isn't the problem, and if they really are cutting off customers of a quarter century just because of variations in a score that (and again, you really should do some reading on predictive statistical modeling and what a joke it really is) boils down to crackpot science, then they're making a mistake. People a whole lot smarter than the software engineers at Austin Logistics or Fair Isaac have tried playing this same game a million times over the last 30+ years, this is nothing "new". They have just repackaged the same B.S. for sale in other industries, in this case lenders. It didn't work for LTCM and it won't work for Amex.

And then there is also the "human factor" which cannot be considered by computer, and the fact is that XX% of the people they're screwing around with will take it personally and won't do business with them again. Still others will gripe about it to their friends and family, a certain percentage of which also will steer away, either consciously or subconsciously, from Amex. There is a cost to all this, and if you really sat down and added it up, it probably exceeds the money they're saving by conducting loss-mitigation through the use of predictive statistical models.

This is a classic business mistake.

Well I think you may have hit the nail on the head. They may be having their own funding issues, and are probably cutting back lines across the board because they would otherwise be unable to maintain the reserves required to service the total of their outstanding lines based on predicted customer drawdowns, especially when they can't place overnight paper. The computer-generated responses people get when their accounts are closed or their credit limits reduced are mainly designed to comply with the FCRA, and aren't designed to disclose the corporate strategies behind lending policies. So I think people are seeing the trees, but not the forest. I do think you're right about the root of their decisions being based on their own financial situation.

But if by some chance that isn't the problem, and if they really are cutting off customers of a quarter century just because of variations in a score that (and again, you really should do some reading on predictive statistical modeling and what a joke it really is) boils down to crackpot science, then they're making a mistake. People a whole lot smarter than the software engineers at Austin Logistics or Fair Isaac have tried playing this same game a million times over the last 30+ years, this is nothing "new". They have just repackaged the same B.S. for sale in other industries, in this case lenders. It didn't work for LTCM and it won't work for Amex.

And then there is also the "human factor" which cannot be considered by computer, and the fact is that XX% of the people they're screwing around with will take it personally and won't do business with them again. Still others will gripe about it to their friends and family, a certain percentage of which also will steer away, either consciously or subconsciously, from Amex. There is a cost to all this, and if you really sat down and added it up, it probably exceeds the money they're saving by conducting loss-mitigation through the use of predictive statistical models.

This is a classic business mistake.

I think what has been mentioned here regarding the lack of cash is the reason. When you pay with Amex or any other credit card company, they have to pay the shop at a certain time (lets say a week or two). Usually the time is prior to the date of your statement.
This is an example:
If lets say Amex had a total of 100 clients, each charging 1,000 dollars per month on their credit card. So by the end of the month (or the certain period Amex has to pay the merchants at) they have to pay 100,000 Dollars to all merchants. If it was a charge card, Amex would be assured that the customers will pay at the end of the month, but with a credit card the customer has the right to delay their payment and carry on the balance. This may cause Amex to have a problem in few months when those 100 clients pay lets say 20% (as an average) of their balance. So rather than having 100,000 dollars to pay at the end of the month, Amex finds themselves with only 20,000.

With the lack of liquidity and cash in todays market (which has kind of happened over night) Amex has to make sure that they do have CASH to give to the merchants when a client uses his Amex card. And the only way to insure this of happening is to reduce the use of the card to people who have the right of carrying on a balance and to those with charge card with a not so optimum history. Another way is to raise their annual fees (which they have done in some cards).

You don't think the fact that a customer has done business with you for over 23 years without interruption, and has never missed a payment, never stiffed you, etc., just MIGHT be a better risk indicator than some crackpot numerical score cooked up and sold to you for a profit by some self-interested third-party (Fair Isaac)?

If you don't see a problem with doing business like that, then I would suggest some reading on the fallacies of statistical modeling. The Black Swan should get you started. It's all quack science. You can't predict the future from the past, it's mathematically impossible. Yet, as a society, we are absolutely fascinated with doing exactly that.

Amex is hassling customers of 23 years for, essentially, no reason. It's ridiculous, and their bottom line is going to show it.

Amex isn't the only one. When Texas let insurance companies move to credit scores for setting rates, I wasn't ranked in the "best" group with an 800+ credit score - even though I had 30 years of no claims with the company.

Clearly you can't predict ALL of the future from the past, but responsible behavior and responsible use of credit is unlikely to change compared to (many) years of past positive behavior.

Might I then, suggest you do some reading on just statistics? It is ironic that you bring up the Black Swan, because it both A) says that you can do statistical modeling in situations like credit card debt, and B) that it recommends extra precautions for situations with statistical outliers.

B) is what Amex is doing, since traditional statistical modeling will tend to underestimate their credit risk in an environment like today's. So they are tightening even where past history hasn't always suggested there may be a problem.

The funny thing about the A) argument is that people on this board always assume Amex is doing the wrong thing based on their individual experience, whereas Amex is basing their decisions on aggregate information.

Look, I'm not saying Amex is perfect. Heck, I am pretty sure even Amex says they're not perfect. And they likely know they will be breaking some eggs this way, but hope to avoid more credit losses than the revenue they lose from pi$$ing of good customers.

What's the alternative? Apply a credit scoring model based length of customer relationship and # of late payments? I don't think so. However, it also sounds like Amex is mismanaging the implementation of their new credit policies by not explaining what is going on, and by having no trainign for their reps in explaining dealing with irrate customers.

LTZ

A: Black Swan is a good start for understanding problems with statistical modeling, but that said it only points out two of many issues. While it is mainly concerned with RAP, flawed input data, and its inability to predict the amount of any likely loss during the times RAP is inaccurate, these are FAR from the only issues with statistical modeling. Additionally, I read the book, and saw nowhere in there any explicit endorsement of statistical modeling for risk prediction on consumer credit accounts. I'd love to have an exact quote and page number for that.

B: I still contend that statistical modeling for risk mitigation on consumer credit accounts, at least in the specific pre-packaged form that Amex has purchased from Austin Logistics, is a complete effin' joke. Just to begin with, it has nowhere near enough variables to be remotely accurate. And remember, these are the same people who close accounts because their risk mitigation software identifies merchants where cardholders who are more likely to default are likely to shop. Except this is CLASSIC confusion of cause and effect, which is only one of many issues with predictive models, since they can't distinguish when two examples of the same result have different causes.

To wit, two of Amex's known adverse action triggers are liquor-store purchases and customer-paid autmobile repairs with certain vehicle brands, Ford being one of them. This is, of course, all courtesy of the idiots at Austin Logistics. So then, how would this model determine the difference between the guy buying parts for his '65 AC Shelby and the guy with the 20 year old Escort who has to charge the repairs to his credit card because he has $0.05 in his checking account? Better yet, how can these models possibly determine the difference between the person buying a case of 40oz malt liquor, and the person buying a bottle of Belvedere? And remember, Amex doesn't see itemized receipts except in disputes.

So, the answer is: There is NO WAY to determine any of the variables necessary for such models to be even marginally accurate. Yet, Amex is actively deploying these laughing stocks that any idiot with a vague understanding of mathematics would immediately get a side-stitch over.

Bottom line: There is no statistical model with an accuracy that would even come remotely close to the predictive value of 23 years worth of positive account history, as in the OP's case. Given that, this is certainly a bad business decision. And surely, the OP in this case is not the only occurrence.

I won't waste any more space here beating this dead horse, but the bottom line is:

1: Amex is using laughably flawed models, and

2: Even the most accurate model cannot actually predict the future with any real degree of reliability. Hence, cutting off this thread's OP with 23 years of positive account history, solely on account of predictive modeling that is far less accurate than the basic ABC's of underwriting, is statistically CERTAIN to be a poor business decision on their part, when repeated over their entire customer base.

Amex isn't the only one. When Texas let insurance companies move to credit scores for setting rates, I wasn't ranked in the "best" group with an 800+ credit score - even though I had 30 years of no claims with the company.

Clearly you can't predict ALL of the future from the past, but responsible behavior and responsible use of credit is unlikely to change compared to (many) years of past positive behavior.

Oh that's another effin' joke. Don't get me started on how little credit scores have to do with driving habits. Speaking personally, I have a good credit score and a terrible driving record. I suspect that the insurance companies were well aware of the flaws in this application of consumer credit reports, but still jumped at the ready-made excuse to raise rates.

1: Amex is using laughably flawed models, and

2: Even the most accurate model cannot actually predict the future with any real degree of reliability. Hence, cutting off this thread's OP with 23 years of positive account history, solely on account of predictive modeling that is far less accurate than the basic ABC's of underwriting, is statistically CERTAIN to be a poor business decision on their part, when repeated over their entire customer base.

Again: they're forced to cull the herd, where do they start? At the bottom. 1 year, 15 years, 60 years. It doesn't matter. If the median score of all their customers is 720-750, there's going to be a lot of pissed off, "worthy" customers.

I'm sure that no one at Amex is happy about having to do this. From the letters Ken C is getting down to the poor CSR's that have to deal with the angry customers. I'm equally sure they'd prefer to continue to borrow money from the commercial paper markets at 3-5% and lend it to you and me at 14%.

Don't take it personally. Its just business.

Well I think you may have hit the nail on the head. They may be having their own funding issues, and are probably cutting back lines across the board because they would otherwise be unable to maintain the reserves required to service the total of their outstanding lines based on predicted customer drawdowns, especially when they can't place overnight paper.

I'm pretty sure they aren't cutting across the board. None of my Amex accounts have changed.

I'm pretty sure they aren't cutting across the board. None of my Amex accounts have changed.

Yet.

And if you read all the varying accounts on this board, as well as several others (creditboards, cardratings, fatwallet, to name a few), it's obvious that Amex has some strategic initiative in place to reduce their outstanding credit lines.

As discussed in this thread, AE is not a typical bank and therefore does not gather deposits. It relies on funding from securitization of its receivables and commercial paper. Its porfolio quality has been and most likely will continue to suffer even more. Eventually this could lock the Company out of the short term borrowing market and into long term, higher interest rate funding.

So AE is moving as quick as it can to reduce credit lines on what it considers consumers more likely to default. It is doing this in the quickest way possible through various computer driven models. These models sound suspect at best and might be totally worthless in the end. But the Company is desperate to reduce its risk with little time to do it. In the long run, AE will probably piss off a number of its long term good customers (like me) that are repaying the balances and will never do business with them again. Neither will I ever buy one of their side products. Once I get down to having the balances repaid within the next couple of years, I will utilize the MR points and be done with them.

I can see AE point of why they need to re-examine their credit exposures but it appears to be done in a half hazard way.

Clearly you can't predict ALL of the future from the past, but responsible behavior and responsible use of credit is unlikely to change compared to (many) years of past positive behavior.

Unless other circumstances change. Maybe the person in question has a lot of other outstanding credit and AX is just cutting first. Maybe the person works in an industry that is less stable than it once was. Maybe they are horrendously upside down on a mortgage or about to become so.

There is a lot more to any situation than just the duration of the relationship.

Unless other circumstances change. Maybe the person in question has a lot of other outstanding credit and AX is just cutting first. Maybe the person works in an industry that is less stable than it once was. Maybe they are horrendously upside down on a mortgage or about to become so.

There is a lot more to any situation than just the duration of the relationship.

From previous posts, it is possible that a few trips to buy expensive cognac (i.e. from a liquor establishment) could trigger it.
Some reports of auto repair shops triggering too...

Unless other circumstances change. Maybe the person in question has a lot of other outstanding credit and AX is just cutting first. Maybe the person works in an industry that is less stable than it once was. Maybe they are horrendously upside down on a mortgage or about to become so.

There is a lot more to any situation than just the duration of the relationship.Amex would have no idea what industry a person works in or if their mortgage was upside down. They could guess but they would not know.

The more I read, the more I am convinced that Amex is simply trying to cut their exposure. Right now it looks like a prudent business decision, but their actions have screwed thousands of long and good customers and we won't forget.

From previous posts, it is possible that a few trips to buy expensive cognac (i.e. from a liquor establishment) could trigger it.
Some reports of auto repair shops triggering too...

The reasons on the letter are meaningless. There's a bunch of menu items to pick and the computer picked any/all that applied.

My theory is that they used these "reasons" to reduce the chances of a discrimination lawsuit.

Check this out: http://www.creditmattersblog.com/2008/07/american-express-my-game-plan.html

If indeed, amex is saying that 730-750 is the new 680 (their old "good enough" score), that leaves a lot of customers out in the cold.

A: Black Swan ....

The Black Swan is an interesting book and it does a good job of explaining that traditional statistical modeling cannot accurately predict wild swings or individial performance. In particular it makes the case that you cannot predict truly unforeseen events (duh). And yet people try. There are of course many other problems with statistics.

For those who have not read it; Amonth other things, the book uses as a basic example that if all you have ever seen is white swans, and you base your prediciton on the color of the next Swann you will see on this, it has to be white. (Yet Black Swans do exist.) Likewise, even right before Thanksgiving, turkeys have no reason to expect they will be killed, since it has not happened to them before. It explains that it is much easier to predict people's height, than their wealth, because the band of likely outcomes is tighter.

Obviously too, it is easier to predict the average height of people living in New York, than that of Mrs. Smith on 1875 57th Street, apt B.

My basic contention is that statistical analysis can predict the likelyhood of default rates among groups of people. So if you live in the 'projects', statistical modeling will conclude that you generally have a higher chance of defaulting than if you live in a ritzy neighborhod. This does not mean that you can accurately predict that Peter will default since he lives in the projects, and that Paul will not since he lives elsewhere. But in a group of Peters, more people would default than in a group of Pauls.

One point is that if Amex is firing all of their Peters, they will absolutely fire some good customers. And they need to assess whether that loss is worth it compared to what they gain.

Another question, which you bring up, is how do you define a Peter. It is obviously not as simple as seeing if the live in the projects (which probably would open up some liability), but clearly more factors than payment hisotry with amex (remember the Turkey example?) should be taken into account.

I cannot comment on particular stat or heuristic packages deployed by Amex.

Unless other circumstances change. Maybe the person in question has a lot of other outstanding credit and AX is just cutting first. Maybe the person works in an industry that is less stable than it once was. Maybe they are horrendously upside down on a mortgage or about to become so.

There is a lot more to any situation than just the duration of the relationship.

Any predictive model is based on past behavior.

Someone who is responsible in their use of credit is NOT going to become irresponsible overnight.

Credit scoring models (which is the same kind of basis that a group like AmEx might use) will be predicting in large part on past behavior. Heck, everyone - from the government (security clearances) to business (credit) to insurance (insurance record) - uses predictive models based on past behavior and how the subject is likely to react going forward.

This sounds an awful lot like "universal default" provisions - for which the credit companies have almost universally been scorched.

I think some portion of this is the new consumer protection rules adopted by the Fed against credit card issuers. If they wait too long, their options become much more limited. Yes, the majority of this is the current ability to raise cash - and the fact that AmEx has been more affected than some other companies.... but don't discount the fact that some of this may be driven by the new credit card rules.

In the end, I'm a bit gratified at the news today that consumers dropped the amount of credit outstanding by a record amount in November. The credit card companies have lived high on the hog for way too long......

Any predictive model is based on past behavior.

Someone who is responsible in their use of credit is NOT going to become irresponsible overnight.




Unfortunately not true at all these days. With unemployment climbing, many people every day are ending up without jobs and instantly becoming credit risks. Many people pay thier bills on time and their income supports it, but they still live paycheck to paycheck. The minute the paycheck goes the first option for people without savings is to start running up credit cards. Once the credit runs out, the last ones to get paid with whatever cash they have are going to be the unsecured creditors.

From what has happened to me plus all of the reading I have done here and at fatwallet, IMO the biggest triggers now are:

- carrying a balance on ANY card.
- making a minimum payments on those balances

Even if you don't fit that profile, Amex has no way of knowing if your job is secure or how much emergency money you have in the bank. Therefore they limit their risk further by hitting people with line cuts that don't fit a negative profile.

Unless other circumstances change. Maybe the person in question has a lot of other outstanding credit and AX is just cutting first. Maybe the person works in an industry that is less stable than it once was. Maybe they are horrendously upside down on a mortgage or about to become so.

There is a lot more to any situation than just the duration of the relationship.

Right, but that's the dumb part, because most people will cut back their spending when things like that happen anyway, without needing Amex to kick them while they're down. Amex is applying a computer model that is essentially "guessing" (inaccurately) about these macro-circumstances, and this behavior will wind up ruining their customer base.

You can only treat people like crap for so long...

Right, but that's the dumb part, because most people will cut back their spending when things like that happen anyway, without needing Amex to kick them while they're down.

Really? I think that the CC companies found out recently that many, many people did NOT act responsibly and cut their spending. Instead they increased their use of credit and ultimately could not cover their debts.

As for AmEx not being able to know if a mortgage is upside down, I'm not so sure that is true. They know your outstanding mortgage from your credit report. They know your address. And they have access to either tax records to get the value of the property or access to information about the real estate circumstances in any particular area that would let them get a pretty good guess. It might not be perfect, but it should be pretty accurate.

Amex would have no idea what industry a person works in or if their mortgage was upside down. They could guess but they would not know.

The more I read, the more I am convinced that Amex is simply trying to cut their exposure. Right now it looks like a prudent business decision, but their actions have screwed thousands of long and good customers and we won't forget.

I disagree because Amex does knows who I work for. If customers keep their credit profile updated with Amex then Amex would know who they work for also. That as well as everything else is on my credit report also.

IMO the biggest triggers now are:

- carrying a balance on ANY card.
- making a minimum payments on those balances


In other words, Universal Default lives.

I disagree because Amex does knows who I work for. If customers keep their credit profile updated with Amex then Amex would know who they work for also. That as well as everything else is on my credit report also.

Given privacy laws these days, Amex (or any other creditor) has no idea who you work for, or how much you make. My employer won't tell anyone anything over the phone. The employment info on your credit report is based on the inputs you put on your credit application. W2's are a year old. Paystubs can be faked.

Short of getting an employment verification letter from your HR department on company letterhead (which only my mortgage company has asked for in the last 10 years), its all hearsay.

Really? I think that the CC companies found out recently that many, many people did NOT act responsibly and cut their spending. Instead they increased their use of credit and ultimately could not cover their debts.

As for AmEx not being able to know if a mortgage is upside down, I'm not so sure that is true. They know your outstanding mortgage from your credit report. They know your address. And they have access to either tax records to get the value of the property or access to information about the real estate circumstances in any particular area that would let them get a pretty good guess. It might not be perfect, but it should be pretty accurate.

Almost. I am certain that Amex doesn't have the time or inclination to do research on your property. What they do have are reports on which markets are tanking the most. They also have ready access to how much you owe and to whom its owed (happily provided by Experian and others in in the form of what's called an "AR" pull). If the amount you owe increases month over month, if you're in a crap real estate market, one or both datapoints can be used to to establish a risk threshold. Pass it and you're subject to review.

Assuming you're in the chosen group, you'll receive a full blown financial review (F/R) and get totally cut off unless you disclose your full financial picture, or more likely or you'll simply have your limits whacked.

All automated, and from the looks of things, all brutally efficient.

- carrying a balance on ANY card.
- making a minimum payments on those balances



I think carrying a balance on a card is not the trigger. Having your total debt increase for 2 or more consecutive months is more important.

http://www.usatoday.com/money/perfi/credit/2008-12-15-credit-card-consumer-squeeze_N.htm

If you were a lender in this economy, wouldn't you worry about someone who's overall debt rises for consecutive months?

Given privacy laws these days, Amex (or any other creditor) has no idea who you work for, or how much you make. My employer won't tell anyone anything over the phone. The employment info on your credit report is based on the inputs you put on your credit application. W2's are a year old. Paystubs can be faked.

Short of getting an employment verification letter from your HR department on company letterhead (which only my mortgage company has asked for in the last 10 years), its all hearsay.

Not challenging your comment but have you ever filled out an Amex credit profile online after your initial application. On the online credit profile page employer is on there and I voluntarily keep it updated. When I get credit line increases they ask about employer and income. Also I've had the same active Amex corporate card account for more than 10 years and a 14 year old active business card with Amex. So in my case and maybe no one else's, Amex knows who my employer is. Privacy laws I understand, but not relevant to what I'm saying and I'm speaking for my situation only.

Not challenging your comment but have you ever filled out an Amex credit profile online after your initial application. On the online credit profile page employer is on there and I voluntarily keep it updated. When I get credit line increases they ask about employer and income. Also I've had the same active Amex corporate card account for more than 10 years and a 14 year old active business card with Amex. So in my case and maybe no one else's, Amex knows who my employer is. Privacy laws I understand, but not relevant to what I'm saying and I'm speaking for my situation only.

I've seen the link, but I've never updated it. Again: you could put anything in there that you wanted to.

I long time ago I worked in a motor repair shop in Fullerton CA. 5 employees, owed by a guy named Robert. When someone there wanted credit, they made up a title and made up a salary and put it on an index card next to the phone. When a lender called to verify employment, whoever answered the phone read what was on the card. Sometimes you verified yourself. :)

My point is they don't really know.

From a lender's perspective once you move past a "thin" credit file, the only real indicator of your financial situation is your AR balance. If your balances are steadily increasing month over month, that's a pretty good sign that you might be in trouble. In many cases I'll bet that is what triggered their Amex CL reductions.

I think AMEX and the whole gang of what are, in my view, predatory lenders are trying to get their licks in before Universal Default is outlawed by the new Democratic Congress and Administration.

In the meantime, do you think it is slightly beneficial to your credit score to make slightly more than the minimum payments on your low interest rate cards to head off the creditors from jumping your interest rates?

I have one balance transfer on a card with Citibank at 1.9% interest. Needless to say, I make only the minimum payment each month. Would it benefit my FICO score to pay a little more than the minimum?

Really? I think that the CC companies found out recently that many, many people did NOT act responsibly and cut their spending. Instead they increased their use of credit and ultimately could not cover their debts.

As for AmEx not being able to know if a mortgage is upside down, I'm not so sure that is true. They know your outstanding mortgage from your credit report. They know your address. And they have access to either tax records to get the value of the property or access to information about the real estate circumstances in any particular area that would let them get a pretty good guess. It might not be perfect, but it should be pretty accurate.

My dad has a $250k mortgage on a $2M house, in a neighborhood where the average house is probably $500k. Amex would have no way to know what his situation, and would inevitably guess wrong if they tried...

I'm sure a lot of people, probably their best customers, are in similar situations.

Additionally, I think your assertion about people not managing their finances responsibly is BY FAR the exception and not the rule. The truth is, most people do manage their finances responsibly, and those who don't are measured in single-digit percentages. Even with the current economic carnage, most card companies default rates are still only around 5%.

So the stats just plain don't bear out your assertions.

Given privacy laws these days, Amex (or any other creditor) has no idea who you work for, or how much you make.

+1

The days of calling someone's employer for a reference are dead and buried. Depending on your industry, doing so may be illegal. And even where it's not illegal, the employer is still opening themselves up to a lawsuit.

As a result, the vast majority of employers won't give out any info to third parties. They are pretty much limited to your voluntary disclosures. This is one more reason why building models that "guess" at things using this type of info is absurd. What counts should be payment history, amount of spend, amount of payments, length of membership, etc. The way they're choosing to manage this stuff is absurd.

My dad has a $250k mortgage on a $2M house, in a neighborhood where the average house is probably $500k. Amex would have no way to know what his situation, and would inevitably guess wrong if they tried...

Why not? I'm sure his assessed value on the tax roles is much higher than his neighbors. There are almost certainly companies that can correlate the approximate values of a house based on the tax records with the outstanding mortgages and calculate a rough amount of home equity, positive or negative, including taking into account local variances in how the assessed value relates to market value. I would be surprised if there wasn't a company that did this on a large scale and sold the data to companies like Amex for pennies a record.

Why not? I'm sure his assessed value on the tax roles is much higher than his neighbors. There are almost certainly companies that can correlate the approximate values of a house based on the tax records with the outstanding mortgages and calculate a rough amount of home equity, positive or negative, including taking into account local variances in how the assessed value relates to market value. I would be surprised if there wasn't a company that did this on a large scale and sold the data to companies like Amex for pennies a record.

His assessed value is <$150k. That figure was only established when he pulled a building permit to add an additional 4-car garage in 1982, and triggered a new assessment. It hasn't been updated since, and cannot be, legally.

In Florida, the max annual increase in the assessed value of your homestead is capped at 3%. So unless you move all the time, then it's almost inevitable that your assessed value will be a fraction of the true market value. The tax assessor does also give a "Just" value figure, but it serves no purpose and they only bother to update it once every maybe 10 years. And it's also a complete joke, relative to a property's market value. Basically, until the property is sold, there's nothing they can do under Florida law to adjust the value.

So I'd say Amex hasn't a snowball's chance in hell of accurately predicting anyone's financial condition based on property records, at least in this state of 16 million people (that's a lot of cardholders). Yet, their models are trying to do exactly that...

So I'd say Amex hasn't a snowball's chance in hell of accurately predicting anyone's financial condition based on property records, at least in this state of 16 million people (that's a lot of cardholders). Yet, their models are trying to do exactly that...

You may be addressing a situation unique to Florida. In other states where there's a cap on the rate at which the taxable value may increase, the assessor still maintains what they consider to be the market value and then separately keeps track of the value that the tax is based on taking into account the maximum growth rate as provided for by law.

BTW, what does Zillow show for your father's home value?

BTW, what does Zillow show for your father's home value?

Wow, nevermind! Zillow is effin' brutal, man. I've never played with that site before, it's pretty neat, but are the values actually accurate? Says market value has plunged. Now $864k and falling. Down like 40% since 2006, and down $50k just this month. ...??? The little graph it gives you literally looks like the downhill slope on a rollercoaster. If this keeps up, I guess the place really will be worth the tax assessment before long. I honestly haven't been paying any attention to the market, looks like a bloodbath.

Still, I'm not so sure some of the values for the other houses I started looking at are accurate. A lot of them are on the intracoastal and showing values of $400k, and that's not so possible. What's your experience?

Wow, nevermind! Zillow is effin' brutal, man. I've never played with that site before, it's pretty neat, but are the values actually accurate? Says market value has plunged. Now $864k and falling. Down like 40% since 2006, and down $50k just this month. ...??? The little graph it gives you literally looks like the downhill slope on a rollercoaster. If this keeps up, I guess the place really will be worth the tax assessment before long. I honestly haven't been paying any attention to the market, looks like a bloodbath.

Still, I'm not so sure some of the values for the other houses I started looking at are accurate. A lot of them are on the intracoastal and showing values of $400k, and that's not so possible. What's your experience?

Zillow is hit or miss. In "popular" areas it tends to be pretty accurate. I live in Atlanta and the sale price where I live is spot on and so are most of the appraisals around the area. It really depends where you live.

Additionally, I think your assertion about people not managing their finances responsibly is BY FAR the exception and not the rule. The truth is, most people do manage their finances responsibly, and those who don't are measured in single-digit percentages. Even with the current economic carnage, most card companies default rates are still only around 5%.


True, and I don't think anyone is disputing this stat, but a couple for factors should be taken account:

5% is not the majority, and Credit Cards are used to handling this percentage. What they are doing now, though, is preparing for this to go up to 7 and trying to stave off 8 and 9. While still single digits, this would mean a doubling of the default rate and could wipe out ALL profits.
Credit card default rates lag peak economic times by 18-36 months, so the impact of the mortgage mess simple has not been felt significantly by the CC companies yet. Amex (and all the others) knows this and is prepapring for the inevitable.
Even if people are managing their finances responsibly, the current crisis will have collateral damage. CC companies will be hit by them too.

You may be addressing a situation unique to Florida. In other states where there's a cap on the rate at which the taxable value may increase, the assessor still maintains what they consider to be the market value and then separately keeps track of the value that the tax is based on taking into account the maximum growth rate as provided for by law.

BTW, what does Zillow show for your father's home value?


As an aside: Amex has a major exposure in FL. A recent analysis showed that the majority of their credit card profits came from 2 states only, where people had been leveraging their home equity values. they are now trying to manage this down before it hits the fan.

I think AMEX and the whole gang of what are, in my view, predatory lenders are trying to get their licks in before Universal Default is outlawed by the new Democratic Congress and Administration.

While I think I agree with you the universal default issue, I have a hard time seeing Amex as a predatory lender. I can be convinced, but need to see some backup for that statement.

As for universal default issues, I think the CC industry are introducing some novel workarounds, such as raising the rate for everybody, and then giving discounts to segments of their card holders.

My AE credit was lowered also, I emailed CEO and various others, they responded quickly and suggested I check my credit. I did and there was a negative. I had it removed and emailed AE but still they have not changed my credit limit. Oh the financial cituation is hurting me bad.

However I have the emails to the AE administration if anyone wants them.

I was talking to a credit card exec the other night, and s/he was of course non-plussed as to why anyone would find Amex' behavior questionable. Of course, where you stand on an issue depends on where you sit, but s/he was not working for Amex and pointed out that Amex was just deploying normal business strategies.

Two things are happening. On one hand, Amex is simply getting rid of less profitable customers. So if you have a card and never use it, Amex may not be getting enough out of you. Reducing your credit line to silly amounts is their way of firing customers, without actually doing so.

Additionally they are managing potential risk. So if you have a high credit limit you never use, they want to reduce it to levels they know you are comfortable managing. Customers who spike credit utilization out of nowhere, have a massively higher probability of default than the average. Another thing they are doing is chasing down credit limits on those carrying debt. So if you carry debt and pay down some, they may reduce the limit on your card to what you carry, effectively limiting your ability to increase exposure. Who they do this do depends black box modeling, which can be creative or questionable depending on who's making the assessment.

The liquor store purchase is a known factor, but I was not very successful in prying out other potential culprits. Except that, allegedly, Amex has known to go ape on customers with a countrywide mortgages because of their exposure to subprime.

But apparently nobody in the cc business thinks amex is doing anything particularly out of the "ordinary". (Then again, what is ordinary is kind of hard to define these days.)

Just thought I'd share.

LTZ

I'm still not sure I understand how this works. Obviously no PhD in Finance here. Also, have not been affected by the credit reduction.

I've been a member since 1980. Never a late payment. Because of my job, some months the balance is over $5k, some it is under $500. Can't remember a month with zero ;-(

So, since the bill is paid in full each month and there is no interest charge, AMEX must make their money by getting a percentage from the merchants.

Now, I do understand that it makes sense to reduce credit for those who make late payments. Could be a sign of bigger problems. But if they go after someone who has a 28 year record of on time payments, then I don't get it. If I cannot charge as much as I did in the past, aren't they also cutting their income? How can that make sense?

Really? I think that the CC companies found out recently that many, many people did NOT act responsibly and cut their spending. Instead they increased their use of credit and ultimately could not cover their debts.

As for AmEx not being able to know if a mortgage is upside down, I'm not so sure that is true. They know your outstanding mortgage from your credit report. They know your address. And they have access to either tax records to get the value of the property or access to information about the real estate circumstances in any particular area that would let them get a pretty good guess. It might not be perfect, but it should be pretty accurate.


One flaw in this theory- ownership of several properties. Credit reports don't list the address of the encumbered property. Which mortgage is for your personal residence? Which is for an investment or second home? There's no way to tell.

That said- I'm pretty sure that CIs do look at this stuff. I'm just not sure
how they adjust for multiple mortgages.

So, since the bill is paid in full each month and there is no interest charge, AMEX must make their money by getting a percentage from the merchants.

Yep.

Now, I do understand that it makes sense to reduce credit for those who make late payments. Could be a sign of bigger problems. But if they go after someone who has a 28 year record of on time payments, then I don't get it. If I cannot charge as much as I did in the past, aren't they also cutting their income? How can that make sense?

Most of the people that have had their credit lines reduced that fall into the above situation you describe (perfect payment history, always pay in full) and have good credit reports but nonetheless have had their credit lines substantially reduced seem to fall into one of two categories:

1. Their credit line far exceeded any reasonable amount that should have been extended to that person based on their income and assets. I'm familiar with a situation where someone had an Optima card with a credit limit that exceeded their total annual income, and that's just one credit card from one company. No reasonable credit underwriting would ever allow a credit limit to get that high on a consumer credit card, even with perfect payment history. The answer as we now know it was that Amex was not actually taking the credit risk themselves, but was collateralizing the debt. So, the more they could lend the more they'd make without actually bearing the risk of non-repayment.

2. A person has a high credit limit but one that was reasonable given their overall financial situation, and did not have a history of using anywhere near it, even during the course of a single month. For example, someone might have had a limit of $20,000 but never charged more than $5000 in a month and always paid it off. Such a person might have had their limit lowered to $6000. Some of these people feel insulted, but the fact remains that they had a personal spending history of never needing more than $5000. Amex was worried that the one situation where they might suddenly need to use it is if they get backed into a corner financially, and before the stress shows up on a credit report. It's probably wise for Amex to adjust limits down in this situation, even if they alienate some people just because they want to feel alienated, even though it had no material effect on them.

I think that both of the above situations are reasonable reactions by Amex. This is not to say that other actions they've taken have all also been reasonable, but as for the above, I think they're acting to rein in the excesses of the past. How they were extending credit before in a way was a mirror of what had been happening on Wall Street and the mortgage market: extension of credit was being made with no reasonable metrics applied, but only with some manufactured "new math" to show some sort of justification for the unjustifiable.

1. Their credit line far exceeded any reasonable amount that should have been extended to that person based on their income and assets. I'm familiar with a situation where someone had an Optima card with a credit limit that exceeded their total annual income, and that's just one credit card from one company. No reasonable credit underwriting would ever allow a credit limit to get that high on a consumer credit card, even with perfect payment history. The answer as we now know it was that Amex was not actually taking the credit risk themselves, but was collateralizing the debt. So, the more they could lend the more they'd make without actually bearing the risk of non-repayment.

2. A person has a high credit limit but one that was reasonable given their overall financial situation, and did not have a history of using anywhere near it, even during the course of a single month. For example, someone might have had a limit of $20,000 but never charged more than $5000 in a month and always paid it off. Such a person might have had their limit lowered to $6000. Some of these people feel insulted, but the fact remains that they had a personal spending history of never needing more than $5000. Amex was worried that the one situation where they might suddenly need to use it is if they get backed into a corner financially, and before the stress shows up on a credit report. It's probably wise for Amex to adjust limits down in this situation, even if they alienate some people just because they want to feel alienated, even though it had no material effect on them.

I think that both of the above situations are reasonable reactions by Amex. This is not to say that other actions they've taken have all also been reasonable, but as for the above, I think they're acting to rein in the excesses of the past. How they were extending credit before in a way was a mirror of what had been happening on Wall Street and the mortgage market: extension of credit was being made with no reasonable metrics applied, but only with some manufactured "new math" to show some sort of justification for the unjustifiable.

The trouble with #1 is that it doesn't account for folks that have substantial assets or investments with little else for obligations. Retired folks, for example, or folks on sabbatical. And yes, the stock market has taken a tumble, but the investments may be hedged, held in cash accounts (or cash equivalent like Govt bonds), etc.

As for #2, income and assets are a bigger deal than used credit/available credit. Every financial adviser recommends that folks keep their use of credit as far below available credit as possible, because that's a component of your credit score. Likewise, affinity cards (airline, hotel, etc) are intended to get you to charge more on that card. Example: I was quite tempted to purchase a car using my Skymiles card to ensure another 10,000 MQMs at the end of the year. I elected not to do so (partly cause the dealership balked, and partly because I decided that it would be better to just pay with a check) - but I did pay my property taxes using the card. Large charge, one-time deal. Perfectly fine (and paid off when the bill came).

Granted, there were excesses due to competition. The one that really annoyed me was MBNA.... when an organization I belong to switched affinity cards from MBNA to another card provider, MBNA immediately raised the credit limit on my card from $20,000 to $60,000. This hit my credit report, and the new bank declined to give me a new card because of the outstanding credit limit (same happened to about 20-25% of the members with cards). MBNA wouldn't lower the limit, offering to cancel the card instead - which would take 3+ months to happen and clear my credit report. At the time, I had two cards, one of which was AmEx - a lot of places didn't accept AmEx. For a variety of reasons, including travel, I was stuck. I managed to get my bank to give me a new credit card account, and used that lever to get MBNA to lower the limit a bit through their "saves" department.

It's those kind of excesses that have caused the problem, I speculate, and now everyone is being tarred.

Good summary, Steve. I'd like to add that other factors such as unusual spending patterns and where you have your mortgage, have been taken into account in some cases more recently.

Is Amex systematically reducing credit lines for some customers and even closing down accounts ..... sometimes even doing that without prior notice to the customers?

Apparently some of this is hitting historically good Amex customers who have rather recently signed up with and used other credit cards even while cutting back or eliminating use of the Amex cards.

Whether or not Amex is using a butcher knife for something that requires a surgical scalpel, this seems to be part of Amex trying to reduce for future potential risk of non-performing loans.

Yep.



Most of the people that have had their credit lines reduced that fall into the above situation you describe (perfect payment history, always pay in full) and have good credit reports but nonetheless have had their credit lines substantially reduced seem to fall into one of two categories:



2. A person has a high credit limit but one that was reasonable given their overall financial situation, and did not have a history of using anywhere near it, even during the course of a single month. For example, someone might have had a limit of $20,000 but never charged more than $5000 in a month and always paid it off. Such a person might have had their limit lowered to $6000. Some of these people feel insulted, but the fact remains that they had a personal spending history of never needing more than $5000. Amex was worried that the one situation where they might suddenly need to use it is if they get backed into a corner financially, and before the stress shows up on a credit report. It's probably wise for Amex to adjust limits down in this situation, even if they alienate some people just because they want to feel alienated, even though it had no material effect on them.

I think that both of the above situations are reasonable reactions by Amex. This is not to say that other actions they've taken have all also been reasonable, but as for the above, I think they're acting to rein in the excesses of the past. How they were extending credit before in a way was a mirror of what had been happening on Wall Street and the mortgage market: extension of credit was being made with no reasonable metrics applied, but only with some manufactured "new math" to show some sort of justification for the unjustifiable.

You hit the nail on the head Steve. We have a SPG AMEX which had a 100,000k+ limit. In years past we have used all of it and had to pay down some to continue using it. Mind you, it has, and always was paid in full EVERY month. Never late. Great credit. In fact when you deal with AMEX at this level you have to provide annual tax returns for AMEX review.

Anyways, got a call a few months ago about "reviewing" our account, and requested ALL financial documentation. I knew where this was going. They reduced the limit to 70k since in the past year we never went over $50k. When I spoke with our rep, we were told since it wasn't used they were essentially removing it, but if we needed it we could ask for another increase.

Now, from a financial perspective, they just took 30k+ off their potential liabilities in a down market, I don't fault them, in fact a commend them. Why extend unneeded risk?

Jim

You hit the nail on the head Steve. We have a SPG AMEX which had a 100,000k+ limit. In years past we have used all of it and had to pay down some to continue using it. Mind you, it has, and always was paid in full EVERY month. Never late. Great credit. In fact when you deal with AMEX at this level you have to provide annual tax returns for AMEX review.

Anyways, got a call a few months ago about "reviewing" our account, and requested ALL financial documentation. I knew where this was going. They reduced the limit to 70k since in the past year we never went over $50k. When I spoke with our rep, we were told since it wasn't used they were essentially removing it, but if we needed it we could ask for another increase.

Now, from a financial perspective, they just took 30k+ off their potential liabilities in a down market, I don't fault them, in fact a commend them. Why extend unneeded risk?

Jim

They're making around $1k/month from you in merchant fees alone; shouldn't they be a bit nicer (i.e. call and ask you) when reducing your credit limits?

You're crazy if you spend another dollar on that card...

They're making around $1k/month from you in merchant fees alone;

Yes, and taking a $100k default risk if they charge it to the limit and don't pay it back. If any more than 1% of the customers in the above situation end up going south each month, Amex ends up losing money.

shouldn't they be a bit nicer (i.e. call and ask you) when reducing your credit limits?

I'm not sure what "a bit nicer" means. CandymanJim already said that they called him about this instead of just writing, and writing is what I'd expect them to do for most customers, and there's no indication they were at all rude on the phone. In fact, I'd be surprised if they didn't assign among their best people to make this sort of phone call.

As far as "asking," what do you think someone that was among the small percentage of people that were having financial problems and about to charge up a large amount on the card would say if asked if lowering the limit was okay?

You're crazy if you spend another dollar on that card...

Why? They ended up lowering his limit to 40% more than the most he had used within any month in the past year, so the new limit would in no way impact CandymanJim's use of the card. And, they called him and told him in advance? Why would it be "crazy to spend another dollar" on this card?

Any predictive model is based on past behavior.

Someone who is responsible in their use of credit is NOT going to become irresponsible overnight.

This is true right up until the point when it's not true.

Just turn the tables and you'll see the error. It's *exactly* the assumption that led to the collapse of the investment banks. Lehman Brothers had over 100 years of blue chip history. Somehow I'd have to guess that's more of a history than any Amex cardholder. That's why people were willing to be counter-parties to transactions with them on things like default swaps. They surely were basing it on the exact principle you espouse above.

After reading this thread I went to Amex online and found that my credit line has been increased by $2500 on my platinum card. I use the card quite often and would have been upset if my credit line had been reduced. I have two Amex cards, one since 1967.

This is true right up until the point when it's not true.

Just turn the tables and you'll see the error. It's *exactly* the assumption that led to the collapse of the investment banks. Lehman Brothers had over 100 years of blue chip history. Somehow I'd have to guess that's more of a history than any Amex cardholder. That's why people were willing to be counter-parties to transactions with them on things like default swaps. They surely were basing it on the exact principle you espouse above.

Madoff is another good example, what can change overnight.

After reading this thread I went to Amex online and found that my credit line has been increased by $2500 on my platinum card. I use the card quite often and would have been upset if my credit line had been reduced. I have two Amex cards, one since 1967.

Are you talking about your Amex Platinum Charge Card or Amex Platinum Optima card?

This is true right up until the point when it's not true.

Just turn the tables and you'll see the error. It's *exactly* the assumption that led to the collapse of the investment banks.

Apples and oranges. Corporate responsibility and personal responsibility are two very different standards. This one isn't even arguable, corporate behavior would be completely unacceptable in an individual.


Lehman Brothers had over 100 years of blue chip history. Somehow I'd have to guess that's more of a history than any Amex cardholder.

More apples and oranges. An individual with a 30 year history is a much stronger predictive tool than a corporation's track record, which is subject to frequent management changes, market conditions, etc.


That's why people were willing to be counter-parties to transactions with them on things like default swaps. They surely were basing it on the exact principle you espouse above.

Nope. People were willing to be counter-parties because it made them money. Lehman continued trading, even after they entered bankruptcy. You are greatly overstating and oversimplifying things.

Yes, and taking a $100k default risk if they charge it to the limit and don't pay it back. If any more than 1% of the customers in the above situation end up going south each month, Amex ends up losing money.

Ha! You're joking, right? You think 1% of customers that AMEX gives $100k limits to default each month? Each month?? You're nuts!

The government gives AMEX banking status, allows them to borrow money from the Fed, they apply and receive TARP funds (taxpayer money) with the government trying to lossen the credit market, and AMEX turns around and cuts limits on good customers. So we give themn 20 Billion taxpayer dollars and they give us a royal salute. I called my congressman and told them to "STOP THE INSANITY".

Amex is just another greedy bailout pig.

The government gives AMEX banking status, allows them to borrow money from the Fed, they apply and receive TARP funds (taxpayer money) with the government trying to lossen the credit market, and AMEX turns around and cuts limits on good customers. So we give themn 20 Billion taxpayer dollars and they give us a royal salute. I called my congressman and told them to "STOP THE INSANITY".

Amex is just another greedy bailout pig.

AGREE everyone should call and write the congressmen/senators and tell them what you know. Also rules were also waived for Amex so they could become a bank very quickly. They have a civic duty.

This article http://money.cnn.com/2009/01/26/news/companies/american_express/index.htm?postversion=2009012619 maybe says why some people are getting their credit reduced. Amex is suffering heavily from rising delinquencies.

More apples and oranges. An individual with a 30 year history is a much stronger predictive tool than a corporation's track record, which is subject to frequent management changes, market conditions, etc.

You are forgetting that a lot of people are employed by these corporations and now losing their jobs. Even people who have been gainfully employed for 30 years are now shut out of the shrinking job market. Add to that the American culture of consumerism and exploiting credit means that it makes a lot of sense to reduce credit limits.

They have a civic duty. They have a civic duty to extend too much credit?

They have a civic duty not to go bankrupt so that they can pay us back the TARP money. Let's all not forget that these are not handouts. Some money will be loans some will be quity investments.

"Kenneth Chenault, AmEx's chairman and chief officer, cited a decline in overall cardmember spending..."

Gee Kenneth, how did that happen?

Bellairpatrol, I couldn't have said it better myself.

AMEX dumps on their best and most loyal customers, then demands and gets a taxpayer bailout.

Never a late payment, and then find that your credit limit is slashed, not because you are less credit worthy, but because AMEX is less credit worthy.

I too plan to make my feelings known to my elected representative STRONGLY:td:

They have a civic duty to extend too much credit?

They have a civic duty not to go bankrupt so that they can pay us back the TARP money. Let's all not forget that these are loans, not handouts.

They have a civic duty not to slash credit lines based on some dumb computer model. You create an endless spiral making the entire economy go down the drain if they cut credit worthy customers.

They have a civic duty not to slash credit lines based on some dumb computer model.

Given that the accuracy of that computer model more-or-less determines the profitability of the entire credit card operation, I think American Express has enough self interest in its accuracy that your adding 'civic duty' into the mix isn't really going to change things.

Also, TARP isn't a loan programme. You don't have to pay back the US Government for assets which were bought with TARP money. The US Government gets equity warrants in exchange for agreeing to buy the assets. Those are for non-voting stock, by the way, so even if it's true in some incredibly vague sense that the US taxpayers now own part of American Express, it doesn't give them a right to a say in the way the company is run.

After reading this thread I went to Amex online and found that my credit line has been increased by $2500 on my platinum card. I use the card quite often and would have been upset if my credit line had been reduced. I have two Amex cards, one since 1967.



well i just wake up this morning and find out my credit wasl lowered from 33k to 14k allways paid on time paid in full each month charge about 20k to 25k per month between all my 4 amex

well i just wake up this morning and find out my credit wasl lowered from 33k to 14k allways paid on time paid in full each month charge about 20k to 25k per month between all my 4 amex

33k -> 14K on one card or all cards? It sounds really odd that they would lower the credit limit below current usage, unless there are other factors at play.

Given that the accuracy of that computer model more-or-less determines the profitability of the entire credit card operation, I think American Express has enough self interest in its accuracy that your adding 'civic duty' into the mix isn't really going to change things.


It seems to me (though I am no expert) that therein lies part of the problem. If the model is accurate (and hence the credit card operation profitable), why did AmEx need TARP funding and a special shortcut to becoming a bank?

Tim Geitner had someone from the treasury call Citibank about their $50 million dollar corp jet and said "FIT IT". Next call AMEX!

It seems to me (though I am no expert) that therein lies part of the problem. If the model is accurate (and hence the credit card operation profitable), why did AmEx need TARP funding and a special shortcut to becoming a bank?

I didn't claim it was accurate. I said that AmEx had no incentive to do anything other than their level best to make it as accurate as possible.

Apples and oranges. Corporate responsibility and personal responsibility are two very different standards. This one isn't even arguable, corporate behavior would be completely unacceptable in an individual.

More apples and oranges. An individual with a 30 year history is a much stronger predictive tool than a corporation's track record, which is subject to frequent management changes, market conditions, etc.

Nope. People were willing to be counter-parties because it made them money. Lehman continued trading, even after they entered bankruptcy. You are greatly overstating and oversimplifying things.

I'm not so sure about that. They clearly have an individual's 30 year history and I have very little reason to doubt that they haven't played with computer models that take it into account.

You'd have to use actual numbers and statistics to discern the correlation between default for a company with a long history and an individual. Not sure if you can just make an assumption.

But prima facie it would seem to me that in a tremendous upheaval like this where investments and real estate are plummeting (from the S&P to Madoff type events) there will be a substantial non-trivial number of higher net worth individuals with perfect scores that find themselves suddenly insolvent, and this is unsecured debt we're talking about.

My point was just that one of the characteristics of the recent crisis is that both people and firms that formerly appeared bulletproof and blue chip are suddenly becoming default risks. The delinquency problems at Amex aren't new (link (http://www.bloomberg.com/apps/news?pid=20602007&sid=a.SS7_usmSqk&refer=govt_bonds)) so I would have to assume they've been studying them.

On a personal level I tend to agree with your instincts too. It does seem to me that they shouldn't be coming down on people who have been highly reliable for decades. But these aren't normal times. It's a math/statistics question in addition to a subjective customer service issue. I'm sure we agree on the latter, but the former we're both just having to guess at.

Some Credit Card Companies Financially Profiling Customers:

http://abcnews.go.com/GMA/GetsAnswers/Story?id=6747461&page=1

ABC NEws.com talks about how credit can/is reduced based on profiles of ALL customers at a particular store you shop at.

Well, I for one find this situation a bit offensive. Amex is sucking up taxpayer assistance, and then turning around and putting the screws to the little guy. That is, IMHO, effed up.

Anyone who has suffered these tactics should probably send a letter to their congressman, senator, and the Treasury Dept., and let them know what Amex is doing to help the economy with their TARP money.

33k -> 14K on one card or all cards? It sounds really odd that they would lower the credit limit below current usage, unless there are other factors at play.

its only on one card i dont know why bc my bussines card got higher limit and stay the same like the others cards

Ten years ago, I decided to no longer use AMEX at liquor stores, massage parlors, Motel 6, WalMart and a few other less than sterile businesses. Also, most charges under $50 go on a different card.

Wirelessly posted (BlackBerry9530/4.7.0.75 Profile/MIDP-2.0 Configuration/CLDC-1.1 VendorID/105)

Ten years ago, I decided to no longer use AMEX at liquor stores, massage parlors, Motel 6, WalMart and a few other less than sterile businesses. Also, most charges under $50 go on a different card.

Why? Does buying a bottle of wine make you in any way more risky of a customer?

IF YOU RESIDE IN THE UNITED STATES CALL OR WRITE YOUR SENATORS NOW! Get off this board and do something!

http://www.senate.gov/general/contact_information/senators_cfm.cfm

I don't understand you people.

American Express makes money by lending to consumers. They want to lend as much as they can based on the market conditions and their assessment of the default risk of any particular borrower.

American Express has every incentive in the world to lend as much as a consumer is able to repay and no doubt invests a huge amount of effort in developing risk management algorithms which try to get them an edge (i.e. lend more).

Now, people want American Express to lend even more; more than they believe consumers are likely to be able to repay. How is that responsible lending? How is that demand even moral? Aren't over-lax lending standards a primary cause of the economic situation in the US right now?

If credit card companies like American Express have a civic duty, it's to adopt responsible lending standards.

I don't understand you people.

American Express makes money by lending to consumers. They want to lend as much as they can based on the market conditions and their assessment of the default risk of any particular borrower.

American Express has every incentive in the world to lend as much as a consumer is able to repay and no doubt invests a huge amount of effort in developing risk management algorithms which try to get them an edge (i.e. lend more).

Now, people want American Express to lend even more; more than they believe consumers are likely to be able to repay. How is that responsible lending? How is that demand even moral? Aren't over-lax lending standards a primary cause of the economic situation in the US right now?

If credit card companies like American Express have a civic duty, it's to adopt responsible lending standards.

Extremely well said!

Greetings,

I've also recently had my credit limit reduced by American Express. When I called, they mentioned that Experian sent them a summary of my credit profile, and based on that summary, they decided to take action. I went ahead and checked my credit report, and saw that American Express had checked my credit report as follows:

AMEX - Serviced by CIC: Date: January 27, 2009, December 26, 2008,
December 2, 2008 , October 31, 2008 ,
September 25, 2008 , July 21, 2008 ,
June 3, 2008 , May 13, 2008 ,
May 8, 2008 , April 20, 2008 ,
April 7, 2008 , March 21, 2008 ,
February 29, 2008 , February 15, 2008 ,
February 7, 2008 , January 11, 2008 ,
November 24, 2007

American Express CO: December 30, 2008
AMEX Account Review: December 26, 2008
AMEX Account Review: July 31, 2008

I also spoke with a customer service representative with Experian, and they stated that they don't send American Express any sort of summary information unless AMEX requests it. Isn't this a little excessive?

Regarding credit line reduction, did the charge card also get affected or only the credit cards issued by American Express?

Greetings,

I've also recently had my credit limit reduced by American Express. When I called, they mentioned that Experian sent them a summary of my credit profile, and based on that summary, they decided to take action. I went ahead and checked my credit report, and saw that American Express had checked my credit report as follows:

AMEX - Serviced by CIC: Date: January 27, 2009, December 26, 2008,
December 2, 2008 , October 31, 2008 ,
September 25, 2008 , July 21, 2008 ,
June 3, 2008 , May 13, 2008 ,
May 8, 2008 , April 20, 2008 ,
April 7, 2008 , March 21, 2008 ,
February 29, 2008 , February 15, 2008 ,
February 7, 2008 , January 11, 2008 ,
November 24, 2007

American Express CO: December 30, 2008
AMEX Account Review: December 26, 2008
AMEX Account Review: July 31, 2008

I also spoke with a customer service representative with Experian, and they stated that they don't send American Express any sort of summary information unless AMEX requests it. Isn't this a little excessive?

If memory serves, the CIC ones were done by you. Do you have Amex's Credit Secure product?

The others are basically "A/R" pulls. They are automated and check to see if you're overall debt is increasing, dropping, or staying the same. None of them are "hard pulls" and do not impact your fico score. The second account review is likely the one that what triggered your reduction.

Let me ask you a question: during the last year did the sum total of what you owe all of your creditors (cards, mortgage, loans, everything) increase, stay the same or drop?

I'd guess that Amex's computer is not comfortable with what you owe right now.

IF YOU RESIDE IN THE UNITED STATES CALL OR WRITE YOUR SENATORS NOW! Get off this board and do something!

http://www.senate.gov/general/contact_information/senators_cfm.cfm

I totally agree. The ABC News video was very enlightening. All the card companies are doing it, including the profiling.

So far American Express hasn't contacted me, nor lowered my credit limit, but Citibank has on all my cards, including the business one. I just got a "Change in Terms and Right to Opt Out" notice from Citibank saying if I didn't agree, they would keep the interest rate on my card the same and would close my card in one year from the opt-out date. Unfortunately, the Citibank AAdvantage cards are our longest held cards, so closing them would affect our credit score.

Of course, also having our credit line reduced will lower our credit score. And we always pay off our credit cards every month. So I guess my option is to open even more cards so my credit to debt ratio remains at its current level.

In the meantime, I will write to my Congressman and Senators and complain. Both Amex and Citibank took TARP money and this is the thanks we get for pay our taxes and our bills?

Here is a link to the US House of Representatives since the link above is only for the Senate:
https://writerep.house.gov/writerep/welcome.shtml

Extremely well said!


I too agree with NickW. The Tarp money is intended for keep institutions from going under. Not to prolong the practices that got them into this mess to begin with.

Yes, some of us will have our credit limits reduced. Heck, many of us will lose our jobs. Is it immoral for companies that receive bailout funds to conduct layoffs as well, then?

What we will see in the CC industry, as in most others hit by the current crisis, is a retraction.

If the worst thing that happens to you during this period of extreme economic contraction is that the limit on a credit card you don't really need ("I pay off this card every month!") gets cut you should consider yourself absolutely blessed.

If the worst thing that happens to you during this period of extreme economic contraction is that the limit on a credit card you don't really need ("I pay off this card every month!") gets cut you should consider yourself absolutely blessed.

I am upset with Amex and you should be also. Let me exlpain. Amex is creating and contributing a viscous downward spiral in the economy if they they are cutting credit lines on anyone who does not default. How you make ask? Because they are making it difficult or more costly to borrow by reducing a credit line on a paying customer they are reducing that persons FICO score which raises or makes it more difficult to borrow money. AMEX is contributing to the spiral down! fyi I have not had my credit line cut.

I am upset with Amex and you should be also. Let me exlpain. Amex is creating and contributing a viscous downward spiral in the economy if they they are cutting credit lines on anyone who does not default. How you make ask? Because they are making it difficult or more costly to borrow by reducing a credit line on a paying customer they are reducing that persons FICO score which raises or makes it more difficult to borrow money. AMEX is contributing to the spiral down! fyi I have not had my credit line cut.

When did credit become a right?

When did credit become a right?


Credit became a right when the United States went off the gold standard and American Express accepted TARP money and and rules were waived for Amex. In particular Amex has a civic duty to keep lending. The United States Government is very intrested in anyone who is accepting TARP and not letting it flow down.

I agree that credit was given out to freely and has been abused by people that were using home equity credit, etc for entertainment, vacations, etc. Now we have a problem that is affecting everyone including those who lived within there means.

You've got to be kidding. A right? Where, exactly, was it written that by accepting TARP money companies agreed to underwrite a US citizen's desire to buy that new HDTV or take that vacation to Disneyland? What happened to giving some things up, saving for what you want, then paying for it? What the heck does going off the gold standard have to do with Americans binging on cheap credit or companies making loans that they never should have made in the first place?

The reality is, the US became addicted to credit. And like with most addictions, giving up what you're addicted to is pretty darn tough.

I'm not sure where, exactly, "Civic Duty" fits in with a privately held company. As NickW said: "If credit card companies like American Express have a civic duty, it's to adopt responsible lending standards."

Back on topic: My opinion is that Amex is being a bit too risk adverse right now. They are cutting off people that they shouldn't cut off. But its pretty easy to say that when you're sitting in the cheap seats. I'm not the one having to answer to shareholders with people defaulting on their debts left and right.

TARP money was designed to get credit flowing thus a Civic Duty to lend by those accepting TARP like Amex.

England specifically made fun of the United States because our Government was giving away money to the banks (Amex) without seeing to it they lend. I agree with you on responsible lending but you just do not cut off or reduce credit lines without proper cause.

If you read todays paper you will see some United States banks refused TARP because they did not want the strings attached to TARP. Once again Amex took TARP!

Amex not only took TARP they had rules waived so Amex could become a bank very quickly. With this assistance comes Civic duty..Do not worry soon it will in writing (law) soon imho...So lets forget the semantics since we both are in agreement that non responsible lending and borrowing put us here.

Credit became a right when the United States went off the gold standard and American Express accepted TARP money and and rules were waived for Amex. In particular Amex has a civic duty to keep lending.

I don't think this extends to people at a high rate of default. And I don't think it extends to continuing to make a single Optima line of credit at 15%+ interest for more than someone's annual income is part of that civic duty. Anyone that borrows more than their annual income at 15% is bound to eventually default, short of winning the lottery, yet that's exactly the kind of loan that Amex had been extending in the past in some situations.

I don't understand you people.

If credit card companies like American Express have a civic duty, it's to adopt responsible lending standards.


Lets forget AMEX has a civic duty. Their business model failed. Their management failed. Their projections for profitability failed. Businesses fail all the time with this scenerio. Let them BK

I'll bet AMEX promised, in discussion with the TARP, that AMEX would take the money and really, really help turn the economy around. The US taxpayer got hosed. NO mone money to these greedy pigs.

It's sad that I worry that getting a DL SkyMiles AMEX (due the impending demise of NW Airlines) will cause AMEX to trigger a review of my accounts with them. It's just that I don't trust them, even though I have never been late on a payment with them and have a credit score near 800.

I have 2 existing accounts -- a green Rewards card and an SPG Amex. I decided on the Gold SkyMiles card (mainly because I put most of my charges on my rewards AMEX) and just wanted the double miles for all my airline purchases (that currently go on my US Bank NW Visa card).

Oh, well, worst that can happen is I get a credit limit reduced on a card that has a $25K line and has never had a balance more than $2K. No big deal, I guess. It's the rewards card with the no preset line that has had balances exceeding $20K from time to time that I would hate to see touched.

TARP money was designed to get credit flowing thus a Civic Duty to lend by those accepting TARP like Amex.

England specifically made fun of the United States because our Government was giving away money to the banks (Amex) without seeing to it they lend. I agree with you on responsible lending but you just do not cut off or reduce credit lines without proper cause.

If you read todays paper you will see some United States banks refused TARP because they did not want the strings attached to TARP. Once again Amex took TARP!

Amex not only took TARP they had rules waived so Amex could become a bank very quickly. With this assistance comes Civic duty..Do not worry soon it will in writing (law) soon imho...So lets forget the semantics since we both are in agreement that non responsible lending and borrowing put us here.

The strings attached to the first round of TARP funding had a lot to do with executive compensation and nothing to do with "civic duty".

Hopefully Geithner will do a better job in the next round.

Either way, extending credit to people that can't pay ti back is what got us into this mess in the first place. Its time for the US to scale back on cheap credit. Amex included.

Oh, well, worst that can happen is I get a credit limit reduced on a card that has a $25K line and has never had a balance more than $2K. No big deal, I guess. It's the rewards card with the no preset line that has had balances exceeding $20K from time to time that I would hate to see touched.

If you have a true FICO score north of 760, I wouldn't worry about a review.

The thing to worry about is that they'll approve you, but give you a toy limit of $1000. You can't reallocate lines between cards anymore, so that would make the Skymiles card pretty worthless. All you can do is apply and hope for the best.

If you have a true FICO score north of 760, I wouldn't worry about a review.

The thing to worry about is that they'll approve you, but give you a toy limit of $1000. You can't reallocate lines between cards anymore, so that would make the Skymiles card pretty worthless. All you can do is apply and hope for the best.

Hard to tell. My "scores" from the 3 bureaus range from 778-798. I'm guessing my true score is lower.

I did apply. I have fraud alerts set via LifeLock (I had a credit card number stolen a few years ago) so they'll have to contact me to complete the application. If the line isn't high enough, I just won't keep the card.

Personally, I would've been happy to split the 25K across the SPG and DL cards, so I'm sorry to see I won't be able to request that as it was something I thought about doing as I have a ton of unused credit lines I don't really need already.

New article in the Times regarding the reduction of limits based on where you're shopping.


http://www.nytimes.com/2009/01/31/your-money/credit-and-debit-cards/31money.html

The credit line on my HHonors Amex was increased recently. I believe what triggered it was me utilizing 75% of the line this month. I normally only use this card for Hilton stays but needed more points quickly. It's very unusual for me to have that high utilization. I was kind of concerned after reading the posts here but to my surprise, they increased my line. My charge card still says no pre-set limit.

The credit line on my HHonors Amex was increased recently. I believe what triggered it was me utilizing 75% of the line this month. I normally only use this card for Hilton stays but needed more points quickly. It's very unusual for me to have that high utilization. I was kind of concerned after reading the posts here but to my surprise, they increased my line. My charge card still says no pre-set limit.

Please provides usefull information. What was the orignal credit line amount? twenty thousand, 50 thousand, etc? If your going to tell me your credit line was 5k and they moved it to 10K guess what? If I was Amex I would do that all day long, every day to everyone user I could with good credit. I know people whose first card was amex and they were given 35K credit lines right out the door. I think those days are gone. Furthermore Amex could hide there drastic credit cuts when they report to the Government by handing out small credit line increases all over the place. AMEX CAN HIDE WHAT THEY ARE DOING when reporting back to United States Gov. That is why it is important to provide useful information.

LA Times Jan 31.....Neil M Barofsky to ask bailout banks to document use of the funds "effort to determine whether banks are FULFILLING the bailout's mission of UNFREEZING CREDIT and EXPANDING LENDING to help lead the economic recovery. [

My line got reduced also, but Ive only been with AMEX for 2 years...anyways, is there a way to pay my bill online BEFORE my closing date so I wont max out my new lower limit?...i have been paying my bill in full online when my statement closes each month, but i dont see an option to pay down my bill DURING the current billing cycle....any suggestions? or can I only pay mid-cycle via phone?

Mail them a check.

Mail them a check.

thanks for the quick reply sko...do you know if there is anyway to do it online? I prefer the conveniece/speed of it..and would like to avoid a possible "we havent received your check yet, you cant use your card until we process your check" situation

My line got reduced also, but Ive only been with AMEX for 2 years...anyways, is there a way to pay my bill online BEFORE my closing date so I wont max out my new lower limit?...i have been paying my bill in full online when my statement closes each month, but i dont see an option to pay down my bill DURING the current billing cycle....any suggestions? or can I only pay mid-cycle via phone?

There is an option to pay online. They have fixed a bug in their system few weeks ago and now you can. I have done it several times in the past month on my SPG Business card with $3,000 credit limit. Just click to view your old statement or current charges and you will see an option to pay your bill.

Most likely you can "push" payments via your bank's website from your checking account to your AmEx accounts. I have this, and set it up as soon as I get a new card (then send a minimal amount like $50, even before I make any charges on it).

Most likely you can "push" payments via your bank's website from your checking account to your AmEx accounts. I have this, and set it up as soon as I get a new card (then send a minimal amount like $50, even before I make any charges on it).

I only ever pay (either mid- or end-cycle) from my bank account. Prefer giving my bank payment instructions directly rather than getting Amex to issue them on my behalf.

Credit became a right when the United States went off the gold standard... In particular Amex has a civic duty to keep lending. Credit is a virtual necessity, but definitely not a right. No consumer or business has a "right" to credit. Amex and the other TARParasites should be loosening up, for sure, but blame Paulson & co. for not making them. Like so many savvy consumers they're just gaming the system for all they can get.

We as a society have assigned Amex (and the mega CC issuers) too much power. They operate alternate currencies under arbitrary rules. They are not our friends, they are not here to support businesses or consumers, they are not to be trusted, and anyone who thinks otherwise is on crack. I keep Amex at the end of a ten-foot pole. The financial system must be changed so people cannot be subjugated (have their businesses crippled, etc.) at the whim of Amex.

We should either revert to a pre-1960 savers' culture where Amex, etc. hold a lot less power over people, or regulate these companies like utilities.

Amex is gaming the system now imho. Amex knows they have to indirectly report to the President of the United States on TARP and they know the United States Gov wants to see continued credit ( we can argue about civic duty but without question TARP is designed to keep credit flowing). Amex can allocate small credit line increases on the $2,000 through $10,000 dollar credit card holders and slash the $37,000 to +$100,000 credit card lines. POOF....MAGIC... Amex can claim they are still extending credit and can claim they have not quit lending or made drastic changes. Amex can burry the truth...they gave out way to much credit and are cutting back imho.

fyi: I use $37,000 because I know amex gave out a 37,000 credit line to a first time amex card holder with little prior credit history.

My line got reduced also, but Ive only been with AMEX for 2 years...anyways, is there a way to pay my bill online BEFORE my closing date so I wont max out my new lower limit?...i have been paying my bill in full online when my statement closes each month, but i dont see an option to pay down my bill DURING the current billing cycle....any suggestions? or can I only pay mid-cycle via phone?

Log into www.americanexpress.com, select the card you want to pay, click on "PAY BILL". At least, that works for my accounts.

Log into www.americanexpress.com, select the card you want to pay, click on "PAY BILL". At least, that works for my accounts.

It doesnt allow me to use 'pay bill' until my statement is closed

It doesnt allow me to use 'pay bill' until my statement is closed

When you login to AMEX, look at "Outstanding Balance" that's the amount you can pay immediately, then click on "pay bill" - if the "pay bill" link does not allow you to pay, then it could be because you made a recent payment. Because of the line of credit reduction, I have gotten into the habbit of making payments before the billing cycle comes to an end.

I read the NY Times practically everyday - There is a Jan 31, 2009 article titled:
"American Express Kept a (Very) Watchful Eye on Charges" In that article I learned about Kevin D. Johnson, a 29-year-old AMEX customer living in Atlanta. I read with great interest about his situation, and how AMEX is doing credit "profiling" on customers.

You can watch his story on ABC's Good Morning America - below is a video link and the news report- there are more than 300 comments on the video/news report at the following link - feel free to add yours:
http://abcnews.go.com/GMA/GetsAnswers/Story?id=6747461&page=1

Kevin started a very helpful website below:
http://www.newcreditrules.com/

I also found the below website by another individual/company that shows useful short videos on credit scores:
http://www.videocreditscore.com/

Wishing everyone the best during these difficult economic times.

Kevin started a very helpful website below:
http://www.newcreditrules.com/

Kevin seems to be a bit of a fantasist to me. He imagines that his website and the coverage it has gotten (I've never heard of it before) will make the fall in Amex's earnings 'even more precipitous'. He analogises his credit score with a Middle Eastern cease-fire.

If you have a true FICO score north of 760, I wouldn't worry about a review.

The thing to worry about is that they'll approve you, but give you a toy limit of $1000. You can't reallocate lines between cards anymore, so that would make the Skymiles card pretty worthless. All you can do is apply and hope for the best.

Close to your prediction. A limit of $2000. While I sit with a $25K limit on an SPG card I cannot move to it. I've never had a balance over $1000 on the SPG card as I use it only for, you guessed it, SPG stays. However, my airfare costs are sometimes quite a bit higher.

Oh, well, it's fee free for a year, so I'll get my 25K bonus miles, use it for my domestic travel, and get rid of it before an annual fee hits it.

Close to your prediction. A limit of $2000. While I sit with a $25K limit on an SPG card I cannot move to it. I've never had a balance over $1000 on the SPG card as I use it only for, you guessed it, SPG stays. However, my airfare costs are sometimes quite a bit higher.

Oh, well, it's fee free for a year, so I'll get my 25K bonus miles, use it for my domestic travel, and get rid of it before an annual fee hits it.

I think after six months you can ask for a limit increase. Others here would know the exact timing.

Close to your prediction. A limit of $2000. While I sit with a $25K limit on an SPG card I cannot move to it. I've never had a balance over $1000 on the SPG card as I use it only for, you guessed it, SPG stays. However, my airfare costs are sometimes quite a bit higher.

Oh, well, it's fee free for a year, so I'll get my 25K bonus miles, use it for my domestic travel, and get rid of it before an annual fee hits it.

Sorry, Rich. :(

SNAGuy is right, it is 6 months for a standard limit increase.

I'd try giving the F/R guys a call and ask them for a limit reallocation. They seem to be a bit more empowered than the front line reps. (800) 842-5303. Worst case is they say "No".

Good Luck.

Sorry, Rich. :(

SNAGuy is right, it is 6 months for a standard limit increase.

I'd try giving the F/R guys a call and ask them for a limit reallocation. They seem to be a bit more empowered than the front line reps. (800) 842-5303. Worst case is they say "No".

Good Luck.

It's interesting seeing such a low limit. I don't have another card with a limit of under 16K and that's used only for gas purchases. I've never had a late payment or anything and my credit use isn't substantial, although I do have a lot of unused credit, including that ridiculous line on the SPG Amex card.

I'll use it, collect the bonus miles, and close the account before it's a year old. I'll just use my normal AMEX charge card after that. I almost canceled the application when AMEX called to verify my identity, and maybe I should have.

Until I read about my theory in major news publication I will repeat.

I think Amex will reduce large credit lines and increase small credit lines and issue as many small credit lines as they reasonably can.

Amex is required to report to United States Congress about the TARP money we gave them to loosen up credit. Amex really has tightened up but they will present total credit line numbers that will look like they are still lending the same amount of money or more. Magic with numbers

The above is just a theory but I think a good reporter could prove it.

It's interesting seeing such a low limit. I don't have another card with a limit of under 16K and that's used only for gas purchases. I've never had a late payment or anything and my credit use isn't substantial, although I do have a lot of unused credit, including that ridiculous line on the SPG Amex card.

I'll use it, collect the bonus miles, and close the account before it's a year old. I'll just use my normal AMEX charge card after that. I almost canceled the application when AMEX called to verify my identity, and maybe I should have.


I think that is their standard operating procedure when you've hit your ceiling with them credit wise. It used to be easy to reallocate a limit from one card to another. Not so easy anymore.

Until I read about my theory in major news publication I will repeat.

I think Amex will reduce large credit lines and increase small credit lines and issue as many small credit lines as they reasonably can.

Amex is required to report to United States Congress about the TARP money we gave them to loosen up credit. Amex really has tightened up but they will present total credit line numbers that will look like they are still lending the same amount of money or more. Magic with numbers

The above is just a theory but I think a good reporter could prove it.

You do indeed repeat it often. :D Oddly, though, I think congress and even the newspapers would say: "Fine. We want you to give a some help to the little guy." Nobody feels sorry for the fat cats, who get their credit lines reduced. (I count myself as one of those cats - in terms of credit lines.) Instead Amex would spin it as making credit more widely available (as opposed to deeply).