The Credit Crisis Hits Home...My Home

[Slainte Mhath]

Yesterday I received a letter from American Express with whom I've been a loyal customer for nearly 15 years. During that time I had built up quite a decent credit line having used my card for work expenses (they reimburse me afterwards) as well as personal expenses. Over the past 12 months things have been a little rough, so I was carrying a balance but making more than the minimum payments. The balance was maybe 40% of the total credit line available.

The letter I received yesterday informed me that they had reviewed my account and decided to reduce my credit limit. They then go on to inform me that they have reduced my limit to basically the next $100 increment above where my balance is currently. This effectively shuts down the card for me, as it leaves only $40 in available credit where last week there was thousands. It also has a huge impact on my credit score, as suddenly I've gone from a 40% debt to credit ratio to a 90%+ ratio. This in turn will make it difficult for me to secure a loan to pay off the balance or another card with low interest rate to transfer the balance. American Express has, in one fell swoop, financially crippled me. I'm now stuck with their card, their interest rate (which I'm sure they will hike on the heels of the reduction) and their payment schedule. In addition, should I fail to pay far more than the minimum payment next time, the interest will likely push the card balance over the limit, incurring additional fees and likely another rate hike.

This should be illegal. If it's happening to me it's happening to thousands of people all over the country. My tax dollars are going to bail these fuckers out while they clamp down on my finances so hard that I have no choice but to pay their inflated rates and exhorbitant fees until I can get far enough out from under them that I can repair my credit which they just trashed instantly. They claim the decision was based on my activity and my balance, but both of those were just fine as far as they were concerned for the past year while things were going good in the financial markets. Now that they lost billions in bad investments I'm suddenly a credit risk.

There isn't a whole lot I can do about it, I know. It's my own fault for being in debt to begin with. I just wanted to vent, and post a warning to anyone who carries a balance on their cards to examine their statements and communications carefully, as your rate could be creeping up, your limits falling down and/or your credit rating changing without your knowledge. As for me, I'm done with Amex after this. The airline miles were nice, but this kind of treatment after years of loyalty is inexcuseable.

[Lorini]

Did you call and ask to speak to a manager? That is really really fucked up. If you haven't already, talk to a manager and write a letter. It may not help but at least you can know that you tried to do what you could.

EDIT: Also tell them that you are going to use a balance transfer offer and they won't get a penny if they continue to do this. Also you might want to re-post this in Everything Else because there are a number of people whom I see post over there that I don't see post here who might could help too.

[awdougherty]

This is actually happening to a lot of Amex customers, regardless of what's going on. Heard other stories of Amex customers having their credit reduced, same thing happened to me but I fell behind for two months so I deserved it.

[Brendan]

Yesterday I received a letter from American Express with whom I've been a loyal customer for nearly 15 years. During that time I had built up quite a decent credit line having used my card for work expenses (they reimburse me afterwards) as well as personal expenses. Over the past 12 months things have been a little rough, so I was carrying a balance but making more than the minimum payments. The balance was maybe 40% of the total credit line available.

The letter I received yesterday informed me that they had reviewed my account and decided to reduce my credit limit. They then go on to inform me that they have reduced my limit to basically the next $100 increment above where my balance is currently. This effectively shuts down the card for me, as it leaves only $40 in available credit where last week there was thousands. It also has a huge impact on my credit score, as suddenly I've gone from a 40% debt to credit ratio to a 90%+ ratio. This in turn will make it difficult for me to secure a loan to pay off the balance or another card with low interest rate to transfer the balance. American Express has, in one fell swoop, financially crippled me. I'm now stuck with their card, their interest rate (which I'm sure they will hike on the heels of the reduction) and their payment schedule. In addition, should I fail to pay far more than the minimum payment next time, the interest will likely push the card balance over the limit, incurring additional fees and likely another rate hike.

This should be illegal. If it's happening to me it's happening to thousands of people all over the country. My tax dollars are going to bail these fuckers out while they clamp down on my finances so hard that I have no choice but to pay their inflated rates and exhorbitant fees until I can get far enough out from under them that I can repair my credit which they just trashed instantly. They claim the decision was based on my activity and my balance, but both of those were just fine as far as they were concerned for the past year while things were going good in the financial markets. Now that they lost billions in bad investments I'm suddenly a credit risk.

There isn't a whole lot I can do about it, I know. It's my own fault for being in debt to begin with. I just wanted to vent, and post a warning to anyone who carries a balance on their cards to examine their statements and communications carefully, as your rate could be creeping up, your limits falling down and/or your credit rating changing without your knowledge. As for me, I'm done with Amex after this. The airline miles were nice, but this kind of treatment after years of loyalty is inexcuseable.

I hate to say this but this sort of thing is the only way this credit crisis is going to get sorted out.

It hurts, but you know the medicine works because it tastes very, very bitter.

[WarrenM]

There isn't a whole lot I can do about it, I know. It's my own fault for being in debt to begin with. I just wanted to vent, and post a warning to anyone who carries a balance on their cards to examine their statements and communications carefully, as your rate could be creeping up, your limits falling down and/or your credit rating changing without your knowledge. As for me, I'm done with Amex after this. The airline miles were nice, but this kind of treatment after years of loyalty is inexcuseable.
Yeah, not to beat a dead horse, but lose the credit cards if at all possible. Banks are scum and will fuck you at the first opportunity. Not worth the risk.

[Midnight Son]

That's pretty fucked up, though. They try that shit with me and they will lose my business.

[Marged]

I hate to say this but this sort of thing is the only way this credit crisis is going to get sorted out.


I disagree. The freeze-up of consumer credit is exacerbating this situation, not making it better. This sort of adjustment should have taken place during the good times. But now it's just going to make things worse.

[Robert Sharp]

Clearly Slainte has hit some tough times and needed to use his CC. Saying that he should stop using it or pay them off isn't very helpful advice. He knows he shouldn't be using them, so he obviously is using them this way because he has to. Nobody intentionally keeps a balance that they could easily pay off.

Good luck to you, Slainte, and thanks for the warning.

[Anaxagoras]

I disagree. The freeze-up of consumer credit is exacerbating this situation, not making it better. This sort of adjustment should have taken place during the good times. But now it's just going to make things worse.

I think he's saying that it's only through this kind of pain that the voters will get up in arms enough to force the politicians to fix the system. Which sounds correct to me.

Not that that helps Slainte Mathe any. Sorry dude.... that sucks.

[Dirt]

Kill the card. It's pretty much what they want. AmEx has always been pretty conservative about carrying credit card debt in their portfolio.

[Brendan]

I disagree. The freeze-up of consumer credit is exacerbating this situation, not making it better. This sort of adjustment should have taken place during the good times. But now it's just going to make things worse.

I agree that this is a case of closing the stable door after the horse has bolted, but in the long term the only way to guard against this sort of credit crisis is to regulate responsible lending.

Here is SA the National Credit act resulted in some people I knew very well losing their jobs and a lot more finding themselves in very difficult circumstances (I worked for a company that developed software for the real estate industry which along with the automobile industry was particularly hard hit. ), but the alternative over the long term was a lot worse.

I think he's saying that it's only through this kind of pain that the voters will get up in arms enough to force the politicians to fix the system. Which sounds correct to me.

This is one of the only ways to fix the system over the long term.

[Midnight Son]

They took a card with 40% utilization and turned it into a 95% util card. They want to fuck him over with fees and then jack up the interest rate. What a bunch of dicks.

And yes, it should be illegal.

[WarrenM]

They want to fuck him over with fees and then jack up the interest rate.
Wait, a bank wants to do this? I'm shocked! Shocked, I say!

[Lorini]

Kill the card. It's pretty much what they want.

Nope, they want him to pay a bunch of interest while reducing their risk to nothing.

The part that worries me about this is that his credit score tanks and he's done nothing to deserve that. A month ago the situation for him was the same as it is now, but now his credit score is down because they arbitrarily reduced the amount of credit he can get, resulting in a very high debt to ratio. It's not like he went out and maxed the card during this time. That part I think legislators do need to look at, because in doing this, the CC companies just make more money for themselves.

[Midnight Son]

Wait, a bank wants to do this? I'm shocked! Shocked, I say!

Have to make sure they can pay those executive bonuses, don't they?

[Robert Sharp]

Oddly enough, my Bank of America card keeps RAISING my limit. My most recent email said that my limit is $45k! That's almost as much as I make in a year, so it's not like I could afford to borrow that much on a credit card. I pay it off completely every month, so they are probably trying to tempt me to borrow more. I have no idea why they think I'm more likely to borrow if I could get 45k instead of 35k though.

[Tim James]

Don't panic. Your financial life hasn't been crippled by one move. Some steps to try, in order:

1. Call a manager or even a basic representative, as mentioned above. Works 9 out of 10 times in any customer service issue.

2. Try to transfer to another card. Other organizations may be healthier and eager to pick up new customers. Perhaps if you talk to someone, they can make a note about your debt-credit ratio so the underwriters know what's going on. I doubt your score has plummeted enough to make a huge difference here.

3. See if you can close the Amex account and agree to pay the card off under the old terms, just to avoid the extra fees from interest making you go over your limit.

4. Do you have an emergency fund? Don't pay off the entire balance since it's better to keep the cash in the fund and go bankrupt than pay the credit card and go bankrupt. Just use it to help you make a larger payment.

5. Check overlimit fees now and see if you can live with them. Basically just ignore the limit, though it makes it harder to pay off in the long run.

5. Start hitting up your family for a short-term loan to cover the interest. You have strong bonds with them, right?

[Jason McMaster]

Slainte, dude, if you need anything give me a call.

[WarrenM]

Oddly enough, my Bank of America card keeps RAISING my limit. My most recent email said that my limit is $45k! That's almost as much as I make in a year, so it's not like I could afford to borrow that much on a credit card. I pay it off completely every month, so they are probably trying to tempt me to borrow more. I have no idea why they think I'm more likely to borrow if I could get 45k instead of 35k though.
They're giving you rope and hoping that you'll run into an emergency and make the mistake of hanging yourself with it. Pure scum.

[Enidigm]

Nope, they want him to pay a bunch of interest while reducing their risk to nothing.

The part that worries me about this is that his credit score tanks and he's done nothing to deserve that. A month ago the situation for him was the same as it is now, but now his credit score is down because they arbitrarily reduced the amount of credit he can get, resulting in a very high debt to ratio. It's not like he went out and maxed the card during this time. That part I think legislators do need to look at, because in doing this, the CC companies just make more money for themselves.

But your credit score really is all bs anyway.

I mean, it has real ramifications, and can determine what sort of mortgage you can get. So i'm not dismissing keeping tabs on your credit score as futile min/maxing. But it's just a game, and it's a game where your opponents (the credit companies) define the rules. And, seeing what happened above, those are rules they can change at their whim or moment of self-interest.

Remember, ultimately, you're in debt to a company. Credit cards aren't a right or a sure thing or something that anyone that's not homeless has to have.

[Ben Sones]

They're giving you rope and hoping that you'll run into an emergency and make the mistake of hanging yourself with it. Pure scum.

I know that you think that credit is the evilest thing since original sin, but out of curiosity, for what possible reason do you suppose that his bank would want him to "hang himself?" Banks don't benefit when their customers get into financial trouble. They want you to maintain a balance and pay them interest, sure, but they also want it to be a balance that you can afford to make payments on, and not one that is going to vanish into thin air when you end up filing for bankruptcy.

That said, I'd call the bank and ask them to lower the limit. Having that much available can have some adverse consequences if you need to get other credit, even if you don't carry a balance.

[WarrenM]

I know that you think that credit is the evilest thing since original sin, but out of curiosity, for what possible reason do you suppose that his bank would want him to "hang himself?" Banks don't benefit when their customers get into financial trouble. They want you to maintain a balance and pay them interest, sure, but they also want it to be a balance that you can afford to make payments on, and not one that is going to vanish into thin air when you end up filing for bankruptcy.
They want you to get in as deep as possible so you'll be making (preferably minimum) payments the rest of your life. It's the entire reason they issue credit cards.

[Lorini]

But your credit score really is all bs anyway.

I mean, it has real ramifications, and can determine what sort of mortgage you can get. So i'm not dismissing keeping tabs on your credit score as futile min/maxing. But it's just a game, and it's a game where your opponents (the credit companies) define the rules. And, seeing what happened above, it's a game they can change at their leisure.

Legislation has in fact changed the credit score game though. Your credit score used to be reduced every time a credit check was made, so that if you were shopping for a mortgage, you could go from having A credit to having less than A credit simply because you were talking to a variety of mortgage companies. Legislation stopped that. Now no matter how many credit checks are made on your account, they only count as one and it doesn't reset for 45 days after the first credit check is made.

So they can regulate this issue and hopefully will. Arbitrarily forcing someone into a lower credit rating and then charging them a higher interest rate ought to be illegal and maybe it will be one day.

[Robert Sharp]

That said, I'd call the bank and ask them to lower the limit. Having that much available can have some adverse consequences if you need to get other credit, even if you don't carry a balance.

Really? How so? I thought having lots of credit available was a good thing. Do you mean that I am less likely to get a car loan because I have a high limit on a CC?

[Marged]

I know that you think that credit is the evilest thing since original sin, but out of curiosity, for what possible reason do you suppose that his bank would want him to "hang himself?" Banks don't benefit when their customers get into financial trouble. They want you to maintain a balance and pay them interest, sure, but they also want it to be a balance that you can afford to make payments on, and not one that is going to vanish into thin air when you end up filing for bankruptcy.

That said, I'd call the bank and ask them to lower the limit. Having that much available can have some adverse consequences if you need to get other credit, even if you don't carry a balance.

Well, but the business model had shifted away from "Making money on the interest," to "Making money on the fees," hadn't it? In which case, the incentives for keeping clients out of financial hot water disappear.

[Hanzii]

THe US credit score system never cease to amaze me (and I'm yet to understand it fully). I'm glad that our finacial institutions aren't allowed to share that sort of information between them - not that they don't have other ways to fuck over customers.

[VegasRobb]

Well that will move along my plan to pay off the AmEx and just use it and clear it monthly.

I will give them credit for boosting my credit limit this time last year just in time for Christmas. I didn't take advantage of it but it was nice to know it was there just in case I needed more stuff for my Qt3 Secret Santee.

Right now I have three cards. Two are paid off and I pay them off in full each month. I put a couple things on each (monthly ACLU donation, school donation, etc). Hopefully I'm thinking correctly that consistently paying off the balance for those cards will improve my credit score in the long run.

In addition, should I fail to pay far more than the minimum payment next time, the interest will likely push the card balance over the limit, incurring additional fees and likely another rate hike.

This makes me wonder if they didn't do this on purpose. It has to suck being at or near the top of your credit limit because you are just dollars away from picking up overlimit fees.

[Ben Sones]

Really? How so? I thought having lots of credit available was a good thing. Do you mean that I am less likely to get a car loan because I have a high limit on a CC?

Whoops! I did some looking and discovered that I actually have that backwards. I swear I remember listening to a financial show a while back that explained why this was a bad thing, but evidently I am either misremembering, or its changed. Currently, having a limit that is higher than your spending is a good thing. The ratio of your balance vs. your limit directly affects your score, so the less of your available limit you use, the better your credit score.

[MikeJ]

I don't know about the feedback of lower credit limit leading to lower credit rating leading to higher fees. That seems a bit screwed up. However, I've always thought that having a lot of credit improving your credit rating was kind of a stupid positive feedback loop anyway.

On the issue of Amex lowering the credit limit, that seems like a reasonable move to me. It sounds as though you were on a pattern of racking up large expenses for travel or whatever then paying them off quickly. Then things get 'a little rough' and you start making lower payments and accumulating a substantial balance over 12 months. I'm sure that from the point of view of Amex's analysis programs, that moved you from one type of customer to another (one with a much higher default risk).

Now, it may not reflect on your actual situation, or intentions, but I'm sure a very common scenario that credit card issuers have to deal with is someone who is making a lot of money, paying the card off, but not saving much. Then they lose their job, live off the credit card for a while, and, if they can't find another job, maybe declare bankruptcy once they have exhausted available credit. It sounds as though your card usage pattern is (rightly or wrongly) raising red flags along these lines.

[Enidigm]

This makes me wonder if they didn't do this on purpose. It has to suck being at or near the top of your credit limit because you are just dollars away from picking up overlimit fees.

That's the illegal sounding part of it (or at least should-be-illegal). But i'm not familiar with laws regulating the contractual parts of credit card offers and how much leeway the company has in changing or enforcing pre-existing or new obligations.

[Tyjenks]

I racked up approximately $30,000 in additional debt in the year I took completely off work to focus on going back to school. I had a good credit that afforded me a decent credit card limit and a home equity line. Hell yeah I wish I could have just thrown the fuckers away, but they allowed me to improve my long term position. Right now, it sucks ass having all that debt.

My sympathies Slainte. Good luck in getting it resolved.

[Ben Sones]

I don't know about the feedback of lower credit limit leading to lower credit rating leading to higher fees. That seems a bit screwed up.

It's not the limit itself that helps your credit, per se--it's the percentage of your available credit that you use. So if you have a $1000 limit and carry a $500 balance, then your credit utilization is 50%. If you up your limit to $5000, but still only carry a $500 balance, then your credit utilizations is 10%. Lower credit utilization = better credit score. So in practical terms, having a high limit actually improves your credit, but only so long as you don't increase your balance proportionately.

[Dirt]

My parents started their business 28 years ago all on credit cards.

[Robert Sharp]

It's not the limit itself that helps your credit, per se--it's the percentage of your available credit that you use. So if you have a $1000 limit and carry a $500 balance, then your credit utilization is 50%. If you up your limit to $5000, but still only carry a $500 balance, then your credit utilizations is 10%. Lower credit utilization = better credit score. So in practical terms, having a high limit actually improves your credit, but only so long as you don't increase your balance proportionately.

Right. That's how I understand it. So in any given month, I probably put about 200-500 on that card, and my total available is 45k. That's a pretty good ratio, if I ever need it. Of course, it also gives me incentive to keep the card, so that might be why they raise it too. I'm not going to tear up a card that helps my credit that much.

[Lurb]

THe US credit score system never cease to amaze me (and I'm yet to understand it fully). I'm glad that our finacial institutions aren't allowed to share that sort of information between them - not that they don't have other ways to fuck over customers.

I was going to post exactly that, down to the wording. Regulation of that shit should be quite simple: banned.

You guys won't let the police have a list of people having guns yet you let a bunch of private corporations pin a tab on people measuring how milkable they are.

[Slainte Mhath]

Thanks for the support guys. Financially, I'm doing OK (I'm employed with little danger of losing my job anytime soon, at least it would appear so, and same deal for my wife we think). We aren't in the red (yet) on a monthly basis, and have a plan to slowly work back from the brink so to speak. The past year or so was a little rough with some unexpected financial hits, but this was more about Amex doing something that looks and smells like an intentional fuckover than anything else, and my desire to warn others of the tactic.

As many have agreed above, it was frankly unethical of them to reduce my limit so far so fast, putting me in a situation where they know that one misstep will result in higher rates and a large overlimit fee. While I certainly accept responsibility for having a larger than comfortable balance on the card, the fact remains that it wasn't anything that was way out of line with what they know my income will support, and it wasn't even HALF the balance of credit they seemed to think I was capable of supporting as recently as last month. I also had not put large transactions on the card recently, so they can't even claim a sudden uptick in useage as a reason for the decision. No, this was clearly designed to put me in a situation where I would be unable to obtain more credit from them while being forced to rapidly pay down the balance or face increases in interest rates and/or overlimit fees. All this on a an account with an excellent rating for 15 years that's been a proven money generator for them the whole time. So much for customer loyalty and respect.

I will take the advice of many folks here and attempt to contact American Express. I will say that I've tried talking to them before about getting a rate reduction and they were less than helpful. I have a sneaking suspicion that they are employing this tactic on many many accounts, and I'm unlikely to get anywhere with them. I'll try though, as even the respite of an extra $500 on the new limit would mean a cushion so that interest charges or an unprocessed transaction wouldn't end up pushing me over the limit.

I am also going to try to obtain a new card with 0% transfer rates to move some or all of the balance. I don't know how much luck I'll have with the shift in my credit rating brought on by my sudden rise from 40% debt to 95% debt (without having made a single purchase!) but maybe someone will bite and I can stick it to Amex by closing out the card quickly before they can score much more interest out of me.

[Slainte Mhath]

On the issue of Amex lowering the credit limit, that seems like a reasonable move to me. It sounds as though you were on a pattern of racking up large expenses for travel or whatever then paying them off quickly. Then things get 'a little rough' and you start making lower payments and accumulating a substantial balance over 12 months. I'm sure that from the point of view of Amex's analysis programs, that moved you from one type of customer to another (one with a much higher default risk).

You could be right, but it seems odd that they were fine with my balance for so long and only now regard me as a risk when I haven't put any additional large amounts on the card in months, in fact, we've barely used it since spring in an effort to keep paying it down.

Basically, long story short, over a year ago I had some work expenses I'd put on the card that were sizeable. When I got the reimbursement check, it went to pay off some medical bills instead. Shortly thereafter, our family dog got very ill and in the two months before he died we racked up nearly $3000 in related expenses. We had no real emergency fund savings during all this time either. Toss on a couple of expensive car repair bills and by March/April of this past year we'd suddenly found ourselves with several thousand dollars of debt, a situation we knew we should have avoided but couldn't at the time. So we've been trying to restructure finances and we were waiting for the end of the year when we both get work bonuses to make a really big dent in the debt (though we'd been paying more than the minimum payments the entire time). Now, just as we were looking at getting out of the woods on some of this debt, Amex goes and pulls this stunt.

Maybe they did see a red flag in my spending pattern of a year ago, but why wait so long to drop the bomb? I think it's more likely that they're simply trying to minimize risk while maximizing reward (fees, rate hikes, etc.).

[Skipper]

Slainte I'm very sorry to hear about your trouble. This does not bode well for other small businesses and self employed folks using Amex.

[SpoofyChop]

They took a card with 40% utilization and turned it into a 95% util card. They want to fuck him over with fees and then jack up the interest rate. What a bunch of dicks.

And yes, it should be illegal.

Jerks yes, but there's no freaking way this should be "illegal."

They have an agreement to lend you money every month up to a certain amount. You are suggesting that once somebody agrees to lend you money every month then it should be ILLEGAL for them to change their minds later?????

You're just not even thinking this through, dude.

Let me restate what you are saying:

Once some company decides to lend you a certain amount of money per month they can NEVER EVER change their minds EVER AGAIN.

For the rest of time they have to lend you that amount of money every month NO MATTER WHAT!!!!

I'm sure we'll see LOTS of companies lining up for that brilliant business plan.

Facepalm.

[Lorini]

Spoofy, you have no clue what you are talking about. They are free to do whatever the hell the want to do with your credit, we get that part. The part that is is not ethical is for them to do it and then turn around and charge you even more, solely because of a decision they made. The problem is not the 95% utilization, it's the reduction in the credit card rating that results from it, meaning that he may have to pay more interest solely because of that reduction. I realize that to you free market people, businesses can do no wrong, but some of us would like them to at least have to think about ethics occasionally.

[Shadarr]

It wouldn't surprise me at all if Amex is in serious financial trouble. I heard about banks and mortgage companies cancelling HELOCs last year, before they started going out of business. It's entirely possible that the CC companies are starting to run out of money as people stop paying their bills the same way mortgage lenders and bondholders did. This may be the front of the next wave in the credit crisis.

[Dirt]

When a person signs on for the card, they get a little packet along with it that states the terms. Part of those terms is that they can change the interest rate whenever they want.

[Janster]

I'm gonna suggest debit card. Credit card balancing is usually the first step to doom. You are not winning by borrowing to pay debt, not on the scale normal people operate on.

Or if you choose the other way, make sure you don't own anything you would hate to loose ;)

[MikeJ]

Maybe they did see a red flag in my spending pattern of a year ago, but why wait so long to drop the bomb? I think it's more likely that they're simply trying to minimize risk while maximizing reward (fees, rate hikes, etc.).

Yeah, if you haven't added to the card since spring, it's pretty suspicious they would act at this time. I was picturing more of a slow buildup.

[SpoofyChop]

Spoofy, you have no clue what you are talking about. They are free to do whatever the hell the want to do with your credit, we get that part. The part that is is not ethical is for them to do it and then turn around and charge you even more, solely because of a decision they made. The problem is not the 95% utilization, it's the reduction in the credit card rating that results from it, meaning that he may have to pay more interest solely because of that reduction. I realize that to you free market people, businesses can do no wrong, but some of us would like them to at least have to think about ethics occasionally.

I agree with you that it's unethical, jerky, stupid, and horrible. It's awful! Don't get me wrong. I HATE credit card companies. Everybody hates credit card companies, the phone company, Microsoft, etc. We all hate them. It's old news.

They're all extremely predatory and extremely slimy. We're all on the same page with that.

It's one thing to say that somebody should not do something because it's sleazy and it's another thing to say it should be ILLEGAL.

You guys never seem to understand that you can't have it both freaking ways. You can't have a ton of products and services of all different shapes and sizes AND then control it rigidly and wrap a ton of laws around it.

The guy needs to vote with his wallet. If what they did to him is sleazy then he needs to find a better business partner.

MS' amazingly stupid legislative solution is going to make it MUCH harder and more expensive for the guy to get credit, not easier.

[Anaxagoras]

When a person signs on for the card, they get a little packet along with it that states the terms. Part of those terms is that they can change the interest rate whenever they want.

Uh huh. And our point is that such terms should be illegal. Are you not following?

[Dirt]

Uh huh. And our point is that such terms should be illegal. Are you not following?

It's their money and it's your choice. You make the choice to accept their terms when you start using the card. The other choice is to not sign on. I do agree that it would be illegal if they did not inform you of the terms beforehand.

[Anaxagoras]

It's one thing to say that somebody should not do something because it's sleazy and it's another thing to say it should be ILLEGAL.
Right... and we're saying that it should be the latter. We are aware of what we're saying.


You guys never seem to understand that you can't have it both freaking ways. You can't have a ton of products and services of all different shapes and sizes AND then control it rigidly and wrap a ton of laws around it.
What you don't seem to understand is that we're not terribly interested in having credit come in all sorts of different shapes and sizes. In fact, we would love to have credit in just one or two formats. And all of them with regulation placed on the financial instituations in order to greatly restrict their actions.

The guy needs to vote with his wallet. If what they did to him is sleazy then he needs to find a better business partner.
All of the financial institutions function in roughly the same way, so he has a lack of choice. And he doesn't have the option to just "not use credit", because credit is an inherent part of how this society functions. If he wants to participate, he needs credit. We all do, unless we're born into old money. Given that it's a necessity, the government needs to regulate it. That doesn't mean the government needs to guarantee it... just that there should be much more government oversight than there is now.

[Anaxagoras]

It's their money and it's your choice. You make the choice to accept their terms when you start using the card. The other choice is to not sign on. I do agree that it would be illegal if they did not inform you of the terms beforehand.

There is extensive precedent for disallowing certain terms & conditions when entering into an agreement. There are several valid reasons for that precedent. Here's a homework assignment: try to figure out why that precedent exists.

[Midnight Son]

Jerks yes, but there's no freaking way this should be "illegal."

They have an agreement to lend you money every month up to a certain amount. You are suggesting that once somebody agrees to lend you money every month then it should be ILLEGAL for them to change their minds later?????

You're just not even thinking this through, dude.

Let me restate what you are saying:

Once some company decides to lend you a certain amount of money per month they can NEVER EVER change their minds EVER AGAIN.

For the rest of time they have to lend you that amount of money every month NO MATTER WHAT!!!!

I'm sure we'll see LOTS of companies lining up for that brilliant business plan.

Facepalm.

Let's see here.... nope. Sorry, banks can't unilaterally change a contract. In my administration, this bullshit stops.

[SpoofyChop]

What you don't seem to understand is that we're not terribly interested in having credit come in all sorts of different shapes and sizes. In fact, we would love to have credit in just one or two formats. And all of them with regulation placed on the financial instituations in order to greatly restrict their actions.

Oh. Ok. I didn't realize what you guys were saying before. This makes a lot more sense to me now. I'm going to change my mind and go along with this from now on.

Other things I suggest should come in "one or two formats"

1) Cars: Honda Civic or Toyota Corolla
2) Mortgages: 30 year fixed at 8.0% or 15 year fixed at 7.5%
3) News: CNN or Kos
4) Food: Rice or beans

Fewer choices that are highly regulated should fix everything.

O_o

[Midnight Son]

Oh. Ok. I didn't realize what you guys were saying before. This makes a lot more sense to me now. I'm going to change my mind and go along with this from now on.

Other things I suggest should come in "one or two formats"

1) Cars: Honda Civic or Toyota Corolla
2) Mortgages: 30 year fixed at 8.0% or 15 year fixed at 7.5%
3) News: CNN or Kos
4) Food: Rice or beans

Fewer choices that are highly regulated should fix everything.

O_o

Ok, you choose to be dense. Must be long financials.

[Anaxagoras]

Oh. Ok. I didn't realize what you guys were saying before. This makes a lot more sense to me now. I'm going to change my mind and go along with this from now on.

Awesome. I think we may have finally gotten through.

BTW, I don't agree with your suggested "other things" that should come in one or two formats. Unlike the credit market, they don't seem to have problems that are ameliorated by regulation & normalization.

[Hanzii]

Oh. Ok. I didn't realize what you guys were saying before. This makes a lot more sense to me now. I'm going to change my mind and go along with this from now on.

Other things I suggest should come in "one or two formats"

1) Cars: Honda Civic or Toyota Corolla
2) Mortgages: 30 year fixed at 8.0% or 15 year fixed at 7.5%
3) News: CNN or Kos
4) Food: Rice or beans

Fewer choices that are highly regulated should fix everything.

O_o

Because as you all know, this is how it is over here where such regulation exists.

Except we get to pick between a Yugo or a bicycle.

[Midnight Son]

Yesterday I received a letter from American Express with whom I've been a loyal customer for nearly 15 years. During that time I had built up quite a decent credit line having used my card for work expenses (they reimburse me afterwards) as well as personal expenses. Over the past 12 months things have been a little rough, so I was carrying a balance but making more than the minimum payments. The balance was maybe 40% of the total credit line available.

The letter I received yesterday informed me that they had reviewed my account and decided to reduce my credit limit. They then go on to inform me that they have reduced my limit to basically the next $100 increment above where my balance is currently. This effectively shuts down the card for me, as it leaves only $40 in available credit where last week there was thousands. It also has a huge impact on my credit score, as suddenly I've gone from a 40% debt to credit ratio to a 90%+ ratio. This in turn will make it difficult for me to secure a loan to pay off the balance or another card with low interest rate to transfer the balance. American Express has, in one fell swoop, financially crippled me. I'm now stuck with their card, their interest rate (which I'm sure they will hike on the heels of the reduction) and their payment schedule. In addition, should I fail to pay far more than the minimum payment next time, the interest will likely push the card balance over the limit, incurring additional fees and likely another rate hike.

This should be illegal. If it's happening to me it's happening to thousands of people all over the country. My tax dollars are going to bail these fuckers out while they clamp down on my finances so hard that I have no choice but to pay their inflated rates and exhorbitant fees until I can get far enough out from under them that I can repair my credit which they just trashed instantly. They claim the decision was based on my activity and my balance, but both of those were just fine as far as they were concerned for the past year while things were going good in the financial markets. Now that they lost billions in bad investments I'm suddenly a credit risk.

There isn't a whole lot I can do about it, I know. It's my own fault for being in debt to begin with. I just wanted to vent, and post a warning to anyone who carries a balance on their cards to examine their statements and communications carefully, as your rate could be creeping up, your limits falling down and/or your credit rating changing without your knowledge. As for me, I'm done with Amex after this. The airline miles were nice, but this kind of treatment after years of loyalty is inexcuseable.

Let me make a recommendation to you. Go to the Consumerist and get in touch with Ben Popken. This kind of story and resulting publicity might just shake AMEX up.

http://consumerist.com/

[Charlatan]

Slainte, same thing happened to me (the lowering of the limit). Please keep us informed as to what you're going to do, because I'm going to do the same thing.

I don't want to close out the card because it's the only credit card accepted at Costco and there simply are times when I have to charge stuff on the card instead of using my debit card. And I will agree I've gotten sloppy on paying it down. But still, it rankled that they did this.

[Reldan]

I always thought the point of having an AmEx card was specifically that it can provide one of the longest no-interest floats out there. Most other cards offer a 25 day finance-charge free grace period, providing you had a $0 balance as of your last statement date. AmEx charges no finance fee as long as you pay in full by a few weeks after your monthly cycle date (which means potentially a float for ~45 days).

All the rates I've seen for what AmEx charges when you hold a balance are horrendous. I've got a card with a 5% APR that I use if I need to hold a balance - AmEx charges well over 10% from what I've seen.

[Lorini]

Amex offers several different cards. The card Reldan is describing is their traditional card. I have a card where you pay interest if you don't pay in full. Slainthe sounds like he has one of these cards too.

[JeffL]

We're currently in a focused effort to pay off all debt and avoid debt completely. Just paid off and closed a card that we once had $10,000 on. One more CC, then the home equity loan and then the house.

While I agree that we all read the terms and understand that we're riding on the back of a rattlesnake when we borrow money from a credit card company, what I do think should be illegal is the practice of luring in people with 0% cards for a few months, then as soon as someone misses or is late with a payment, bam: 29% interest rates. Happened to me earlier in my life. At that point, if you have any amount of debt on it at all, you're screwed. There should be some kind of limit on how high they can raise the rate, and how quickly.

That said, credit card companies are predatory slime, and getting in bed with them is like taking a loan from a loan shark. I've learned the hard way that learning to spend only what I make (after many years of tons of debt) is the only way to say screw you to them. The friends I have who have learned to simply not buy something if they don't have the cash yet are the ones who seem to not worry much about money.

[Rward]

When I got my first credit card, I was naive and wet behind the ears.
I went shopping, bough some stuff and sat back smiling.

At the end of the month I got a statement from them which I ignored as I had a '6 months interest free' card - so obviously I don't have to pay anything for the next 6 months.
End of the next month I get another statement and this time it has a line "Interest +Rxxx".
WTF?
All the tv ads I'd seen had said this was a '6 month interest free' card and now I'm being charged interest!

So I spoke to a couple of people and they all said what I know now - 'Interest free - as long as you pay the minimum amount'.
Something the don't really publish anywhere.
I paid the card off the next day with the money I had sitting in my normal account and so started my hate for credit card companies and banks.

Good luck to all affected - i hope you get it sorted out soon.

[Lorini]

When I worked for Best Buy, I always made sure to tell people that the 'interest free' offer depended on them paying the minimum amount ON TIME and if they didn't, the interest would skyrocket to some number over 20%.

[Janster]

Why did you buy stuff on CREDIT when you had the money to pay it outright?

[Coca Cola Zero]

Why did you buy stuff on CREDIT when you had the money to pay it outright?

I can't speak for whoever you're asking that question of, but for me: Rewards, enhanced buyer protection, etc.

Despite what the anti-credit-card crowd here says, there are completely valid reasons for using credit cards even when you have the money to cover a purchase, though you should always pay in full each month and not carry a balance on the card(s).

[WarrenM]

enhanced buyer protection
We've covered that. A debit card carries the exact same protections as a credit card. It has to, by law.

[Slainte Mhath]

Slainte, same thing happened to me (the lowering of the limit). Please keep us informed as to what you're going to do, because I'm going to do the same thing.

I don't want to close out the card because it's the only credit card accepted at Costco and there simply are times when I have to charge stuff on the card instead of using my debit card. And I will agree I've gotten sloppy on paying it down. But still, it rankled that they did this.

I called them last night and spoke with a credit services manager. He claims to have submitted a recommendation to raise my limit back up a few hundred dollars so I can at least avoid having an errant charge or interest fee push me over the limit, but I won't know for sure until I get a letter in the mail confirming the increase in 5-7 days.

Manwhile, I've been told the hit to my credit may not appear for as long as 30 days depending on the reporting cycle, so I'm going to attempt to secure a bank loan in the timeframe to cover the debt. I figure I'm better off paying a local bank 10% interest than I am paying Amex 20% or more as they jack up my rates. I have zero equity in my home at the moment though, so securing a loan may be problematic (hence my willingness to carry a balance rather than try and get a loan earlier). We shall see...

[Robert Sharp]

We've covered that. A debit card carries the exact same protections as a credit card. It has to, by law.

Yep. But when someone drains your actual bank account, you have no money until it gets fixed. When someone charges a bunch, it's no big deal.

[Lorini]

Also debit cards are a pain in the ass when it comes to renting cards or doing anything else that requires a deposit because they charge a bunch to your card (stopping you from using that money in your bank account) and then release it (you hope) when you return the car. It's not the same at all when you use a credit card because of the protections on both sides.

[Coca Cola Zero]

Debit cards also tend to have much lower default daily limits than credit cards do. Yes, you can often get the limit raised temporarily by calling the bank, but it just isn't as convenient as a good credit card.

I think maintaining an ongoing credit card balance is a bad idea, but I just can't get behind the idea that people shouldn't even have or use credit cards at all. Maybe if you have no impulse control that's a good policy, but if you pay your credit card bills in full every month there is no real downside and plenty of upside (especially with a good rewards card).

[Coca Cola Zero]

No, there are other reasons, like irrational fear of magnetic stripes.

[AlanC]

Amex is cutting people's credit because they can't get credit either: http://www.bloomberg.com/apps/news?pid=20601087&sid=aajOmDkW3xeE&refer=home ["Credit Card Bond Sales Plunge to Zero, First Time in 15 Years"]

The credit card business looks a lot like the mortgage business the last few years. Issue as much credit as possible to consumers, fund it with bonds, and pray that the music never stops.

[Slainte Mhath]

Amex is cutting people's credit because they can't get credit either: http://www.bloomberg.com/apps/news?pid=20601087&sid=aajOmDkW3xeE&refer=home ["Credit Card Bond Sales Plunge to Zero, First Time in 15 Years"]

The credit card business looks a lot like the mortgage business the last few years. Issue as much credit as possible to consumers, fund it with bonds, and pray that the music never stops.

Interesting. That would certainly explain the sudden about-face in lending policies. The article specifically mentions Amex having to pay a lot more for the money to lend and having no takers on credit-backed securities sales. The job cuts and loan write downs just add insult to injury. Sounds like the company is in some financial trouble of it's own. Their use of the Fed's program corresponds with the date they issued the letter to me (and presumebaly thousands of other customers). Looks like the credit lending business may be headed for the same fate as the mortgage lending business. Thanks for the link!

[Kraaze]

Oh wow, credit card companies are getting credit crunched? I've been in favor of economic bailouts to date and sympathetic towards the the big banks caught up in the crisis, but I can't help but being amused at the idea of big credit card companies getting fucked. Considering how hard they've lobbied for legislative changes to make it easier for them to fuck consumers I'd absolutely love to see them get fucked. It's probably not a good thing for America, but man would it amuse me.

[Dirt]

Credit Cards are good for large purchases for the protection. Just be sure you can pay it in full.

[Lorini]

This article (http://www.latimes.com/business/la-fi-lazarus5-2008nov05,0,6448941.column) is interesting because it discusses how credit card companies want to start forgiving credit card debt. You would have to go to a credit counselor (which can hurt your credit by itself; another stupidity) but who knows, maybe it'll actually happen.

[AndrewM]

In relevant bailout news, apparently American Express is going to become a bank holding company (http://dealbook.blogs.nytimes.com/2008/11/10/american-express-to-become-bank-holding-company/), so it can get access to some sweet sweet bailout cash.

[AlanC]

First Goldman Sachs and now Amex. Next thing you know GMAC or GM will become banks. Qt3 Bank anyone?

I promise not to spend too much of our "bailout money" *winkwink* on too many resort trips.

[Midnight Son]

Hear about the latest AIG trip? This time, they tried to do it undercover.

http://www.abc15.com/mostpopular/story.aspx?content_id=d84dfd07-dd97-49f7-af14-3714d80b9107

AIG made significant efforts to disguise the conference, making sure there were no AIG logos or signs anywhere on the property.

An AIG spokesperson said there were no AIG markers in order to minimize signage costs and to lower the company's profile.

A hotel employee told ABC15, "We can't even say the word [AIG]."


Why don't we go ahead and test this whole "too big to fail" thing?

[Slainte Mhath]

Well the AmEx news certainly explains why they would be tightening the credit noose around consumers necks. No more money to lend means they needed to shrink risk at all costs. I wonder if they'll become more relaxed now that they have access to cheap money from the Fed and possible bailout booty. Somehow I doubt it, and even if they did I'm totally done with them as a customer now. I wonder if they had folded if I could have settled my debt for pennies on the dollar to whomever bought up the assets?


The AIG thing doesn't bother me as much. Companies like AIG rely on these conferences to bring in independant financial consultants and insurance agents who earn CE credits for attending. While doing so they are primed with knowledge of all the latest AIG products, then presumeably leave the conference and sell said products to their customers, generating income for AIG. It's a pretty accepted practice in the industry, and I wonder if the money they'd lose in sales wouldn't be more than the money they spend to put the conference together.

That said, you would think that executives would lay low and that the PR firm they use would be explaining the entire thing a lot better.

[Destarius]

There is extensive precedent for disallowing certain terms & conditions when entering into an agreement. There are several valid reasons for that precedent. Here's a homework assignment: try to figure out why that precedent exists.

I have to agree with Dirt on this. If you want credit which can't be varied, that is a committed credit line and you have to pay a percentage of that line for that.

Your credit limit on a credit card can change ANY TIME. The bank can even just terminate your card and not tell you why.

[Kraaze]

I have to agree with Dirt on this. If you want credit which can't be varied, that is a committed credit line and you have to pay a percentage of that line for that.

Your credit limit on a credit card can change ANY TIME. The bank can even just terminate your card and not tell you why.

I have to agree with Anax on this one. It's not good for society for credit card companies to be legally allowed to play gotcha trap games with customers who have a balance. What's to stop them from changing them max limit to half of what is currently owed and immediately levying overlimit fees? What about adjusting the max balance every single month so that it's just a hair over the current balance so that even one missed or late monthly minimum payment leads to overlimit fees?

Anyone who thinks card companies wouldn't stoop to this has never had a Capitol One card.

[WarrenM]

Banks are not your friends.

[JeffL]

There is a fable about a rattlesnake (or cobra) who asks for a ride on the back of some swimming animal across a river. The animal gives him the ride across the river, then when the snake is safely across the snake turns and bites and poisons the animal. As the animal dies, it cries out and asks why the snake bit him. The snake simply replies, you knew I was a rattlesnake when you gave me the ride.

Credit cards and the institutions are that rattlesnake. Whether you like it or not, whether it's fair or not, know when you associate with them what snakes they are and that they will bite you simply because they can.

[Mordrak]

There is a fable about a rattlesnake (or cobra) who asks for a ride on the back of some swimming animal across a river. The animal gives him the ride across the river, then when the snake is safely across the snake turns and bites and poisons the animal. As the animal dies, it cries out and asks why the snake bit him. The snake simply replies, you knew I was a rattlesnake when you gave me the ride.

Credit cards and the institutions are that rattlesnake. Whether you like it or not, whether it's fair or not, know when you associate with them what snakes they are and that they will bite you simply because they can.

I think it's a frog and a scorpion, but ya, the same idea.

[Tim James]

The moral is correct but the story doesn't exactly fit. It'd be more like the banks giving shady consumers "a ride" with credit and money, who then bite them by filing for bankruptcy or something.

[Rimbo]

Oh wow, credit card companies are getting credit crunched? I've been in favor of economic bailouts to date and sympathetic towards the the big banks caught up in the crisis, but I can't help but being amused at the idea of big credit card companies getting fucked. Considering how hard they've lobbied for legislative changes to make it easier for them to fuck consumers I'd absolutely love to see them get fucked. It's probably not a good thing for America, but man would it amuse me.

I've quoted the old adage before, and now's a fine time to say it again: "Nothing like a bull market to bring out the crooks, and nothing like a bear market to catch them."

[JeffL]

I think it's a frog and a scorpion, but ya, the same idea.

Ah, I think you're right. (Hmm - I do remember a rattlesnake in there somewhere?)

[VegasRobb]

Yesterday's cover story for USA Today talked about Credit Card Companies raising fees and interest rates.

http://www.usatoday.com/money/industries/banking/2008-11-09-bank-credit-card-interest-rates_N.htm

[Lorini]

First of all, the credit card companies have to run under US law. Rattlesnakes have their own law and it can be quite arbitrary. Amex is paying me $740 this year in cash on my cash rebate card. I have not paid them a fucking penny and will never do so. I win this. Absolutely and unequivocally. It's simply a matter of making credit cards work for yoiu. Sometimes you can't do this and you take a risk by borrowing from the credit card company and it doesn't work out. But going to all cash literally loses you money.

There is no question that credit card companies can (and should retain the right to) reduce your credit limits. What they should not be able to do is to reduce your credit limit and then force you to pay the extra fees just because of the reduction. I think this will change in the coming months. They'll still be able to reduce your credit but the change won't be able to result in higher interest. We'll see. We have an incoming president who is in a bank regulating kind of mood, as well as the Congress, as well as the voters who are very very unhappy with banks. So we'll see.

[WarrenM]

But going to all cash literally loses you money.
It also eliminates risk. I know you think you're winning but keep sticking your hand into the snake pit and you will eventually get bitten.

[Funkula]

Wait, I thought we were carrying the snakes across the river.

[WarrenM]

No, the snakes are carrying the scorpions to the bank. Right?

[Lorini]

It also eliminates risk. I know you think you're winning but keep sticking your hand into the snake pit and you will eventually get bitten.

Dude, I'm 51 years old. Way old enough to know how this works :) :) No biting here. I even know to read the contract changes that may come along where they try to screw me over!! :)

[Destarius]

I have to agree with Anax on this one. It's not good for society for credit card companies to be legally allowed to play gotcha trap games with customers who have a balance. What's to stop them from changing them max limit to half of what is currently owed and immediately levying overlimit fees? What about adjusting the max balance every single month so that it's just a hair over the current balance so that even one missed or late monthly minimum payment leads to overlimit fees?

Regulators, the market and the courts.

The issue, if you may recall, is reducing credit availability. What you are now trying to argue is something else altogether.

[MyNameIsWill]

This happened to me too and was quickly resolved by a call to CS.

[NoWayJose]

Ah, I think you're right. (Hmm - I do remember a rattlesnake in there somewhere?)
Not only that, but the story is that the scorpion stings the frog while they're halfway across the river, dooming them both. The frog asks him why he would do that if it's against his own best interest, and scorpion replies, "because I'm a scorpion."

[Gendal]

I put everything on my cards including utilities and then pay it off with automated withdrawals for the full amount every month. It's convenient, has a lovely paper trail, protects me from fraud, and earns me massive amounts of points that I use to pay for my gaming habit. Never been charged a nickel of interest, and I plan to keep it that way.

I am not sure how they could ever bite me, outside of suddenly charging me a yearly fee, which was easy enough to reverse and cancel.

Also did the original poster try calling them up and talking with them? Every time I talk with AMEX they bend over backwards to help out, though maybe that's not true anymore with the changing financial landscape.

[Kraaze]

Regulators, the market and the courts.

The issue, if you may recall, is reducing credit availability. What you are now trying to argue is something else altogether.

I think we may be talking past each other then, because I'm pretty sure I was discussing games that could be played with reducing credit available. One of the hypothetical scenarios I pointed is in fact very close to what the OP reported happening.

[Destarius]

I think we may be talking past each other then, because I'm pretty sure I was discussing games that could be played with reducing credit available. One of the hypothetical scenarios I pointed is in fact very close to what the OP reported happening.

And they will remain hypotheticals. No one is going to reduce your available credit below your drawn credit and then charge you fees for it. That's probably a sure-way to draw regulatory attention and burnination.

[Kraaze]

And they will remain hypotheticals. No one is going to reduce your available credit below your drawn credit and then charge you fees for it. That's probably a sure-way to draw regulatory attention and burnination.

I understand your argument, that they'll be motivated to not do these currently legal but slimy thing by their desire to avoid regulation. I'm just not sure I agree they are that rational. Companies can sometimes do some very silly and short sighted things, especially when they are feeling pressure.