CHESSNOID

The market tipped down a little bit today, but that wasn’t a big deal. I think all the enthusiasm the investors are showing banks are misplaced. Just because they are posting lower quarterly losses, they are still losses. I personally believe they are cooking the books. They are manipulating their numbers to make them seem like they are better than they actually are. Bank of America is not including the losses of its already acquired company Countrywide which was a government back door bail out. Just like Bear Stearns being bought out by JP Morgan. Wells Fargo changed their charge off policy from 120 to 180 days. That will definitely affect the books. Again, this is me just reading between the lines in the articles that are posted by mainstream media. I doubt we are out of the woods. We were just in bear market territory for a week. They just are never that short.

I think companies that haven’t been affected by the general market news are coming down from some of their euphoric highs. Google, Apple, and American Express are heading south. They actually all came back pretty strong from January’s dip but the numbers they are putting out show less spending by consumers. American Express is now experiencing more delinquency from the recession and less card usage from loyal customers who aren’t or were never late because of their policy to cut everyone’s credit lines across the board indiscriminately. Including yours truly.

I am still getting comments from my post about American Express cutting their credit lines. After they reported earnings today, I expect Amex to get more aggressive to cut potential losses by chasing the balances even on customers who have never ever been late. Great way to alienate your loyal client base and to show that we are just only numbers. Below I reprinted all the comments from that American Express blog post.

Jimmy H on 2/25/2008 commented:

The exact situation you described has happened to me twice recently. Late last year, they reduced the spending limit on my Starwood rewards card with no provocation and then cut off the “Flex Spending” option on my Platinum. I’ve never been late once on any account, well over 700 credit score, etc.

I was also upset that at around the same time they had denied a charge on one of my charge cards that supposedly has no spending limit and they said it was because of the balances on my other accounts. When I then told a customer service rep that I simply took out another AMEX charge card and it went through fine, she was unable to address why one card would work and another did not.

I then spoke with an AMEX customer service manager about this situation and after a very long (1 hour) debate on how reducing credit actually penalizes customers even more for the same issues that they claim to be doing this for, she didn’t have a logical response. After pressuring her, She also confirmed that AMEX is getting away from issuing credit (they took away my flex spend rights on my platinum card) and regretted launching the “Flex Option”. She then had the nerve to actually say that I should pay down my balance on my Blue card. I laughed at her suggestion, stating that at 3.99% it makes no sense for me to do that especially when ING, Etrade etc are offering ~5% interest in a savings account.

I was pretty much insulted at this point as I have had a number of cards with AMEX over the years for personal and business reasons and paid of the charge cards and closed the accounts.

I kept my Blue card and one charge card open, and well of course over a few payments with no spending activity, they saw an opportunity to take away more credit. This month, they made the biggest cut by reducing down my Credit Line on my Blue Card, which they previously had not done. I don’t’ use the Blue Card much and simply transferred some balances to the card to take advantage of the low 3.99% APR. They pre-approved me for the line and encouraged me to take advantage of the balance transfers. If I had known they’d take that away, I’d have not done it. I have had a balance of $13,000 with $20,000 credit line and they recently reduced it down to $13,200 for “a recent review of your credit history.” Now it looks like I’m maxing it out.

The thing that makes me most upset is that my balances with all of my credit lines (non-AMEX) are LOWER than when I got the card and I even paid off a $30,000 loan on a vehicle in cash, and I even had a higher % of available credit than in the past.

Bottom Line: AMEX is doing something to reduce their risk in credit they’ve issued. But whatever system they are using, it is flawed as it seems to penalize the best, most loyal customers, as well as those who may be abusing their credit.

I smell a class action lawsuit coming, so justice may be served after all. At the very least, your blog is a good starting point.

Having just read a fantastic article about “Consumer Vigilantes” in Business Week (March 3rd edition) and finding out that there is someone else out there in the same situation as me, leads me to believe that something should be done about AMEX’s practices.

I think that it is completely wrong for a credit card company to reduce your available credit if you’ve been a loyal customer and have paid your bills on time and your credit history has not changed. Because by doing so those companies have the power to hurt your credit score when you’ve done nothing but honor your agreement to pay and spend within the guidelines that they set.

From Recession is forcing American Express to reduce credit lines for no reason, 2008/02/25 at 1:24 PM

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T Mase on 3/17/2008 commented:

You can file a complaint about your credit card company with the Office of the Comptroller of the Currency, Customer Assistance Group, 1301 McKinney Street, Suite 3450, Houston, TX 77010-9050. They have been bombarded with complaints about credit card companies.

From Recession is forcing American Express to reduce credit lines for no reason, 2008/03/17 at 8:27 PM

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Jason on 4/3/2008 commented:

Same crap here! American Express doesn’t give a damn about its loyal American customers who have kept them in business, maintained good credit and pays early. DON’T USE AMERICAN EXPRESS. None of my other cards have done this. Don’t reward them for sticking it to us.

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Gina on 4/5/2008 commented:

OMG…I have been online today trying to figure out if I should close my AMEX Gold Rewards Charge card…and came across your blog. I am SO relieved I’m not the only one going through this with AMEX!!!

I have been a loyal customer of AMEX since 1995 and because of them offering me so many promotions in the past — and increasing my credit lines (without asking), I have accrued five AMEX cards…all for different “perks.” A few months back I went online to pay my bill and thought someone had stolen my credit cards. They had reduced my credit limit on two of my cards…just like that! I have paid every single one of my cards on time…every month for the past thirteen years. I have spoken to CS endless times and have gotten nowhere. To make matters worse, last month when I tried to use my Gold rewards card (which I hadn’t used in a few months prior), they put a hold on all five of my AMEX cards…I still don’t understand, but the jist of it was that I had started using my Gold card again over the last two months, but BEFORE that I hadn’t used it in about six…and even though the balance was ALWAYS paid in full every month, they saw the spending as a risk (condensed explanation).
Anyhow, I could go on…so many issues with them now…and they declined my ONE charge this month AGAIN (bill was just paid in full last week) until the bill is paid on its due date in three weeks. I still want to know if CLOSING my Rewards Gold card (that charges $150.00/yr) will damage my credit. I know closing CC accounts literally damages your credit rating. Again, this is a no-limit charge card.

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Traci on 4/14/2008 commented:

Amex just did the same to us. We have never had a late payment, had a twenty point increase in credit rating over the last months and have been agressively paying down our balance–which will stop as of today. I’ll make minimum payments and turn my dollars to other cards–after I write my congressman and discuss their behavior with our corporate attorney.

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TJ on 4/17/2008 commented:

I recently started a small business with my wife and we decided to use Amex as our card of choice for the startup costs which we projected to be about $12,000 over a period of about 4 to 6 months. We have a green Amex, A Blue Amex and a Corporate Amex (for the record). I tried to purchase a refurbed mac computer online for $1700 and the charge was denied. I called the computer company to tell them to re run the charge. Denied. I called them again and they said I needed to call Amex. Called Amex and they said, Oh we’re sorry, we just wanted to make sure it was you making the charge. Yes, it’s me. Ok then, we will authorize the purchase. Tried the charge again (this has taken two days now). Denied. Called Amex and was told by service rep this time that he was not authorized to allow the charge. Asked for a manager. Manager was rude (Mr. Christmas, ha!) and basically told me that we never had a balance of over $800 for the 8 years we have had the card (and I made sure he saw that we paid it off EVERY MONTH!) and that he would “over ride” the charge for this one time. And that the charge was approved the previous day but that I charged lunch ($6.43) after they authorized the $1700 purchase so it cancelled the over ride the previous day (which NO ONE EVER TOLD ME). Then he made up some other stuff which was not true and I got angry with him and told him that his staff lied to me and that my $$ was in my checking account as we spoke and I would never charge anything that I could not pay. He said I would need to 1.) pay off the outstanding balance after the computer charge went through befoere they would let me charge anything again, 2.) call ahead for pre-approval on every purchase, 3.) that I had to get a new Corporate Amex for company purchases in that company’s name, and 4.) that I had too many inquiries on our credit file (which was a lie because we had just refinanced our 30 year 6.875% fixed mortgage to a 15 year 4.5% fixed because we had NO inquiries on our credit and awesome credit payment history.

After all of that, Amex reduced the limit on ALL THREE OF OUR ACCOUNTS and TWO OTHER CORPORATE ACCOUNTS THAT MY WIFE WAS ON to $100 over the balance and basically froze the accounts by requiring pre-authorization for any charge.

Amex is going bust because I am telling everyone I know about this (and they all say they have had similar experiences by the way). I’m keeping all the cards open and paying them down to $0.01 so that they have to keep me on the books and send me account statements every month and I will send inquiries to them every month until they choke. I may even open up more Amex accounts just to keep doing it. I am writing my congressmen, sending a letter to every board member and officer in their company as well.

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TJ again on 4/17/2008 commented:

And we do not plan to offer Amex as an acceptable form of payment on any of our websites or in any of our stores, or for retail or wholesale purchases.

Membership has its privileges…phooey!

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Anna on 4/17/2008 commented:

TJ i like your plan about paying it down to .01 Can you please explain it more. I had a similar incident with AMEX…my FICO score was shot because they lowered my credit limit from $6000 to $3500. My balance was $3200. This is after I made a big payment and I’ve never missed or made a late payment b4. I called AMEX and the rep told me they will lower my credit limit to a comfortable level for them. I was infuriated and asked “gee why didnt you lower it to $0 while you were at it”. Well he basically insinuated they would’ve except “we can’t lower the credit limit below your balance” !@#$% Friggin A! I think we should all team up against AMEX’s cruel treatment against customers!

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Laura on 5/12/2008 commented:

WOW! THERE IS A BIT OF COMFORT IN KNOWING I AM NOT THE ONLY ONE. TODAY, AMERICAN EXPRESS DID THE SAME TO MY COMPANY CARDS AND EVEN PUT A LIMIT ON MY PLATINUM AMEX. I ASKED THEM TO RETURN THE FEE I PAID “FOR THE PRIVILEDGE” OF HAVING THE PLATINUM CARD (WITH NO LIMIT). THEY REFUSED.

I HAVE EXCELLENT CREDIT, NO LATE PAYMENTS EVER AND A HIGH INCOME. I KNOW THIS WILL EFFECT MY CREDIT SCORE UNTIL THE BALANCE IS PAID OFF.

I WILL BE CONTACTING MY ATTORNEY!

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Jim Kemerling on 5/28/08 commented:

Bank of America has also started the same stuff. I have 750 plus score and owed 600.00 on card that has a limit 38000.00 they called and said that my new limit is 2000.00 I cancelled the card and will no longer use this bank.

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Ken Florentine on 7/12/2008 commented:

I am closing my account on Monday. They reduced my credit line for the second time. Credit scores are 718, 736 and 764. Never been late. I just opened a new Citi card with a 9K limit. Guess that caused it. They will no longer insult my integrity.

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Bea on 7/21/2008 commented:

This happened to me last week have 6 cards with Amex (Business and Personal) over $35,000 in credit as well as some cards with no ceiling. Never paid late, no balance ever, have been a customer for over 7 years with a 740 fico. Out of the blue they call me and wipe out all the credit on Amex. Although I don’t really need the credit from them (still just the point of this) wish they would really get in trouble for doing this, especially to customers that pay their bills, have an excellent track record and credit history. This feels awful.