American Express playing “chasing the balance” game

I have actually posted a few entries about American Express. The first time was when I looked for reasons why my credit lines were being cut. At the time I didn’t find too many entries about it. After my blog post, slowly other consumers were posting their similar experiences. Basically, we were profiled as risks and targeted to have credit lines reduced without merit or reason. This was disappointing because American Express was the company that had the image of catering to the needs of people looking for more than just a credit card and would make decisions on a case by case basis. That is why when they did what they did, it was disheartening.

Lately, they have actually started reducing my credit limit by the amount of my payment. Basically, they were keeping me at 99% utilization of my credit line. The only 2 negative effects of that is I don’t have credit available to make anymore purchases. That is not a big deal because after the credit limit decrease, I felt no more loyalty to give them my business. The second negative effect is that it lowered my FICO score dramatically when the credit scores were updated. Even though it is not American Express’ concern how its actions affects its customers, they will drive away their long term business away and shrink their client base. I do buy insurance products from their sister company Ameriprise but will be switching on my next renewal. I do accept them as a merchant with Visa, MC, and Discover but will consider dropping them in the near future too. I know I am only one customer, but many in my situation feel the same way. If they don’t want my business, then I will definitely take it somewhere else.

I looked up to see if anyone else is having their credit lines cut in the amounts of the payments they make. I only found this one article but I am sure I will get comments like on my previous posts. This is what I found out about “chasing the balance” :

If past is prologue, credit-limit decreases — and American Express is not the only credit-card company doing this — is a reaction to what creditors perceive as increased risk of defaults. Hurricane Katrina, for example, left thousands of people relying on credit cards for food and necessities and at a greatly increased risk of filing for bankruptcy. One of the most common stories John Ulzheimer, president of Credit.com Educational Services, heard during his visits to the area was that of credit-limit decreases. It appears that certain creditors were engaging in a practice called “chasing the balance.” Creditors not only lowered a person’s credit limit to match their current balance, but every time the consumer made a payment on the account, they lowered the limit yet again, thus leaving consumers at 100% utilization month after month.

“They were doing it to prevent people from spending on their cards,” says Ulzheimer. “There are two ways to mitigate risk with a credit card: Shut down the limit or increase the interest rate.”

Click below to see my older American Express posts:

2 Comments

Subscribe to the Comments

I. Samuel Moth, September 11, 2008:

You are not alone. American Express and other large banks are performing these acts on thousands if not millions of perfect payment consumers, and the scope covers all areas of credit from personal cards to HELOCS. The media, as driven and owned by the banks would have “us” believe that this act is a mandatory lifeboat response having to do with managing risk and loss precipitated by the mortgage fiasco which in fact was created by the banks themselves when they threw billions of dollars at unqualified consumers around 2001 with knowledge of their poor risk and just to make a buck. The truth is that the main banks, thanks to affiliations with the Federal Reserve, will always “win”. For the past 8 years of this crony administration the banks have not only made huge buckets of cash via the standard interest-rate way on cards but in addition, have been gloried by corporate tax breaks. Now the tide is turning and the thieves will be driven from office in November via the peoples’ elections. This means no more tax slash for banks. So they’re waking up, albeit groggily and with greed at the forefront, as always, driving the corporate bottom line, they are sticking it to long standing good faith customers without the slightest regard for damaging their credit. This becomes a temporary double-win for the banks as they incrementally raise interest rates to squeeze the last drop and chase the balance to unconscionably wreck the credit of good faith customers like yourself. In order to understand why this happening, you should distance yourself from your personal picture and examine the larger picture objectively. The fact of the matter is that this is a planned operation by the main banks in conjunction with the Federal Reserve to gain substantial control over the populace, whittle down all but the highest class and proceed with the next step in the New World Order. What can you do in response? Well, you can quit spending on your cards and rip them up. Quit living beyond your means if it involves using credit and savor the feeling. You can feed the negativity created by dwelling on their injustice or you can learn new ways of living to free yourself from the clutches of institutionalized banks. Or, you can calculate the damages the banks have in fact caused you by ruining your good credit and might be surprised to find that the amount of those damages just might equal the very amount you owe them. What a coincidence. Wash.
Beth, December 29, 2009:

Will this practice of chasing the balance become illegal under the new credit card laws that take affect Jan. 1, 2010?