American Express Appears to be Stepping Up Its Slash and Burn Campaign

One of my favorite sites, creditboards.com, is great for a lot of reasons. That’s why I contribute in the forum all the time. I’m giving back to a place where I have taken so much. It’s called paying it forward. But another reason I hang out there is so that I can keep my finger on the pulse of the credit landscape. What I’ve noticed during the past two days is that American Express is wielding its sickle with a lot more frequency now. It seems to be stepping up its campaign of exposure reduction aka lowering limits.There are at least five threads at the creditboards forum that illustrate my point see the threads here, here, here, here, and here. A couple of the people who have suffered adverse action in the past 24 hours are, what I would imagine, very low-risk customers. Doesn’t matter, apparently. American Express is taking a knife to these limits. Also, make no mistake. I am referring to American Express cards that are underwritten by the American Express Centurion Bank. This column is not applicable to American Express-branded cards that are underwritten by banks such as Citibank, Bank of America, HSBC, USAA, etc.Users at creditboards aren’t the only ones suffering adverse action, either. A lady who was interviewed by the Los Angeles Times saw her $30,000 limit card cut to $1,000. See story here. A quick search on Google will likely turn up other stories as well. There is also a thread at creditboards.com regarding a RUMOR that American Express may be getting out of the credit card business as opposed to the charge card biz. I don’t know where this information is coming from, so I cannot give the rumor any credence. Could be a poster simply trying to scare people for all I know. Update: the poster said this about the rumor: ‘A friend of mine from California works at a bank and that is what they talked about at the water cooler…it is just a RUMOR.’Notwithstanding that rumor, it would not shock me if Amex was getting out of the credit card business though it’s unlikely. American Express has its roots in the charge-card biz. Amex seems to have a real disdain for customers who carry a balance on credit cards that can be revolved each month. As I’ve said before, if American Express wants these people to pay in full each month, why is it even in the CREDIT card business?A couple of months ago, when I applied for my Amex card, I wrote a very lengthy article about my game plan for American Express link here. After the last couple of days, I’m convinced that my rationale for getting a charge card instead of a credit card was spot on. American Express, at the end of the day, seems to be struggling with its decision to be a credit-card company in addition to being a charge-card company. Most of the slashing during the past 24-48 hours has centered around credit cards though I have seen some charge cards get their exposure limits reduced as well. By and large, though, I think that American Express — for now — is going after credit card customers first no proof, it’s just my hunch. After that, maybe they make a run at charge-card customers. I’ll keep saying this until I am blue in the face: diversify, diversify, diversify. You never know when a creditor will start taking a torch to credit limits. Have backups to your other creditors.We’re living during a very uncertain time right now. People are on edge. I imagine these latest American Express moves are not helping things.Related Articles:American Express to Cut 7,000 JobsAmerican Express Customers: Don’t Try This At HomeAmerican Express Rates Credit Risk By Where You Live, ShopAmerican Express — The Game PlanAre Your Shopping Choices Hampering Your Ability to get Credit Line Increases?American Express’s Financial Review System is Flawed, But I Respect Its Right To Request A Financial Snapshot From Time to Time

American Consumers Are More Likely Than Ever To Default On Loans, Bills, Study Finds

Mary Pilon, who holds down the fort at The Wallet, takes a look at data that were released by TransUnion today. According to the Credit Risk Index, which TransUnion created about a decade ago, extending credit to American consumers is nearly 25% more risky than it was just ten years ago. From the Wallet:Lenders use the Credit Risk Index to determine creditworthiness in different geographic areas. The index baseline is 100, but it rose to 124.79 at the end of 2008 — meaning that consumers are defaulting on accounts, loans and so on with greater frequency and in bigger numbers.The data is used at a broad level and has no bearing on individual loans and lines of credit. But for consumers, this number helps explain why it’s much harder to secure a loan these days, and might hint at why more people are receiving notices from their credit-card company, informing them that their credit limit’s been cut.Read the rest of Mary’s story here.You can read TransUnion’s press release here.

All In One Place: Citibank Coverage

Given how much Citibank coverage there is at CreditMattersBlog.com, it’s become a necessity to put all of it in one place. During the past four weeks, I’d guess that half of my search traffic has been related to Citibank and the recent interest-rate increase that it smacked millions of customers with. I can only imagine how difficult it must be for a new reader — looking for specific information — to find what he or she is looking for. Let this blog entry, then, serve as an attempt to make life easier for those looking for information on Citibank.If you suffered a Citibank rate hike you might be able to get your APR reduced. A few of us have converted our cards, which resulted in lower APRs. Did You Suffer A Citibank Rate Jack? You May Be Able To Do Something About It—Maybe Citibank went too far with the rate jacks. Maybe too many people opted out. Citibank is sending letters to customers who opted out of a proposed rate jack — in an attempt to win them back. Unfortunately, Citibank doesn’t seem to be offering any incentives to come back.Citibank To Customer Who Opted Out Of Proposed Rate Jack: Let Us Win You Back—Citibank’s interest-rate hikes are not set in stone. Before opting out, you should give Citibank a call and make your pitch. This story tells you how to do it.Don’t Accept Your Citi Hike Laying Down—Has Citibank recently increased your interest rate? Looking for an opt-out letter to send to Citibank? This story is for you.Opt-Out Letter For Citibank Credit Card Customers—What happens if you opt out of Citibank’s interest-rate increase? How will your FICO score be impacted? What if this is your oldest account? This story looks at some of the issues that Citibank card customers will face.The Citibank Opt-Out Decision — Everything You Need To Know—CNN’s Drew Griffin took Citibank to task for its rate-jack strategy. The timing of the hike, meanwhile, came right on the heels of a government bailout. Anderson Cooper 360 video on Citibank rate jack—Citibank’s interest-rate increase impacts a wide range of customers. Some will opt out; some won’t. What I want to know, and what I aim to figure out, is what Citibank will look like down the road — after the dust settles. Citibank’s Rate-Hike Strategy — Where To From Here?—Michelle Malkin, blogger extraordinaire and Fox News contributor, highlighted one of her readers, who was miffed about an interest-rate increase she received from Citibank. In the process, Michelle used one of my stories to illustrate that her reader wasn’t alone.Citibank Tells Cardholders To Take A Hike—If Citibank is raising interest rates on 20% — or fewer — of its cardholders, why is my interest rate being doubled?Citibank To Raise Interest Rates On CreditMattersBlog.com—Before Citigroup received a government bailout, the company — and its stock price — was on the ropes. In the meantime, Citibank card customers were feeling the pain. I highlighted a number of reader comments from my site, showing the breadth and impact of Citibank’s interest-rate hike. Citigroup On The Ropes — Credit Card Customers Feeling The Pain—Citibank isn’t the only card company sending change-of-terms letters to credit-card customers. If you receive a change in terms, and don’t like the new ones, how do you reject them? That’s what this story is about.Change of Terms in Your Credit Card Agreement — How Do You Reject The New Terms?—This is the story that kicked everything off. The Wall Street Journal was the first news publication to mention Citibank’s interest-rate increase. Citibank customers, meanwhile, flocked to my site in droves. Indeed, this blog entry alone has received more than 230 comments.Citibank To Raise Interest Rates On Its Plastic—Other Citigroup/Citibank Odds and EndsA Conversation With Vikram Pandit, CEO of CitigroupShould Citi Field Be Renamed Taxpayer Bailout Field?Citibank Pulling A Large Number Of Its Credit Cards Out Of The Affiliate Marketing ChannelCartoon Of The Day: No. The Fed Will Not Give You $20 BillionU.S. Agrees to Rescue Struggling CitigroupCitigroup Plans To Cut An Additional 53,000 Jobs

Advanta Shuts Down Credit-Card Lending Amid Surging Charge-Offs

Beginning next month, Advanta credit-card customers will no longer be able to use their credit cards to make purchases. The card issuer says that customers will be able to pay their existing balances over time. The halt in credit-card lending, which takes place on June 10, will affect some 1 million customers. From Bloomberg:Advanta has reported three consecutive quarterly losses and has seen its shares plunge from about $30 in June 2007 to $1.13 at the close of New York trading yesterday. The U.S. jobless rate reached 8.5 percent in March, a 25-year high, squeezing sales for small business owners. The economic slowdown affected Advanta’s customers across the country, Chief Financial Officer Philip Browne has said.“We’ll be shutting down accounts for future transaction activities, but many of the customers will maintain balances and pay us off over time,” Browne said yesterday in a telephone interview. “We’ll have to service and collect on that, and that will be the first order of business for the company.” Desperate times call for desperate measures. Advanta hopes the halt in lending is temporary. However, my prediction is that Advanta will not survive. The card issuer caters to small-biz owners. Small business has been ripped during this economic downturn. Still, Advanta’s business tactics likely didn’t help matters either. The company reported a charge-off rate of 20% back in March. Given the card issuer’s penchant for hiking rates to 30%+ on customers who are in good standing — and who have not missed any payments — it’s not surprising that Advanta is now getting killed. You reap what you sow. Read the full story here.

5 Tips For Talking To Elderly Parents About Credit Card Debt

For many of us, this day is coming. At some point, we’ll have to address the credit-card debt that our parents hold. Creditcards.com has a how-to piece, which offers some advice on how to approach the situation. Seniors, 65 and over, represent the fastest-growing group when it comes to rising debt. Better to tackle the conversation earlier rather than later, I say. From the story:For some senior citizens, credit card debt is a way of life that gets more difficult to handle as they get older. Julie Murphy Casserly of Chicago spent her whole life watching her parents struggle to pay the bills. By the time she was old enough to take a peek at their financial issues, they had $72,000 in consumer debt, including unpaid credit cards and old orthodontia bills. Even after Murphy Casserly, the author of ‘The Emotion Behind Money: Building Wealth From the Inside Out,’ helped her parents tap a home equity line of credit to pay off debt, bad health and poor money management skills soon created another mountain of debt in its place. ‘It was a chronic problem,’ she says.Many older people, even frugal ones, are simply unable to make ends meet on a pension or Social Security check, so they turn to plastic to pay for daily living expenses, like groceries and gas. Other seniors plunge into debt when their health takes a turn for the worse. A stroke, a heart attack or a bout with cancer can create thousands of dollars in medical bills, which elderly patients may be pressured to pay with a credit card.By the way, the kids might have something to do with elderly parents — and rising debt levels. I wrote a story last year about children moving back in with their parents. You can read that story here link.Read the rest of today’s story here link.

Weeklong Series: Different Paths, Same Result: Good Credit Scores

During the week of August 18-22, 2008, I ran a series of question-and-answer interviews with people who had achieved credit success — even if getting there wasn’t always easy. Instead of finding people with perfect credit I could have done that without a problem, who have never had a blemish or setback during their entire credit lives, I figured that I would find a mix of people to interview. And this note: with the exception of one, all of my interviewees requested that I not use their entire name for these interviews. In one case, one of my interviewees insisted that I use an alias, as he didn’t feel comfortable putting his real name on the Internet. That said, given the current credit climate, I don’t blame any of them for wanting to retain some anonymity. Credit card company employees read my blog on a regular basis, so I can understand their concern. In this weeklong series, you’ll certainly see people who have led perfect credit lives. But you’ll also find people who stumbled along the way. Regardless, what I hope to do with this series is show you that there is more than one way to slice and dice a credit portfolio — and score.What’s more, I’m hoping that these stories will inspire you. We’re all at different stages in our credit journey. Some lead charmed lives and have never experienced financial setbacks. Others may be in the middle of a financial firestorm even now. Others may be on the road back from financial trouble. Still others may be heading down the wrong path even as they’re reading this series.Whether you are moving up, down, or sideways, I’m hoping that you enjoy this series. I’m hoping that you’ll take something away from it — something that helps you achieve all of your credit goals.I’d love to hear your feedback from these stories. Feel free to comment on any and all of them.Monday: One Man’s Struggle to Overcome Bankruptcy — and Reach FICO 800 link here2 For Tuesday: 1 Have a Plan if You Want to Keep Your Scores High link here; 2 Patience is a Virtue but Paying in Full is Divine link hereWednesday: Bigger, Better, and Smarter — How Rebecca Bounced Back From Consumer Credit Counseling link hereThursday: Who Needs FICO 800? Scores of 760 to 799 Work Just as Well link hereFriday: Having a High FICO Score is Nice — But it’s Just One Piece of the Financial Puzzle link here Credit Matters Blog

3rd Circuit Deals Blow To Class-Arbitration Waivers

Good news for credit-card users. Bad news for the credit-card industry. The 3rd Circuit Court of Appeals held that arbitration clauses may be struck down — as unconscionable — when they prevent the use of class actions in cases where a large group of consumers have claims that would normally yield small sums of money for individuals litigating on their own. From The National Law Journal:The unanimous three-judge panel concluded that state courts as well as federal courts applying state law are free to declare that such class-arbitration waivers are unconscionable — even if the contract included a choice-of-law provision that called for applying the law of a state that is decidedly amenable to such pro-business provisions.The ruling is a victory for attorney F. Paul Bland Jr. of Public Justice in Washington, D.C., and Gary S. Graifman of Kantrowitz Goldhamer & Graifman in Montvale, N.J.Bland hailed the ruling as a major victory for consumers and said it clarified an important area of 3rd Circuit law by underscoring the power of state courts to reject arbitration and anti-class action provisions they deem unconscionable.In the suit, a proposed class of New Jersey consumers claim that American Express cheated them by falsely promising rebates of up to 5 percent of purchases made with the Blue Cash Card, and that, in reality, the rebates proved to be much smaller than originally promised.The 3rd Circuit remanded the case. On remand, the district court judge will have to decide whether New Jersey state courts would deem such a class-arbitration waiver provision unconscionable. ‘We hold that, if the claims at issue are of such a low value as effectively to preclude relief if decided individually, then … the application of Utah law to the class-arbitration waiver is invalid and the class-arbitration waiver is unconscionable,’ U.S. Circuit Judge Franklin S. Van Antwerpen wrote. Given that most of these credit-card disputes involve relatively low-dollar amounts, not worth a single individual’s time, money, or effort, I’m hopeful that the district court judge will find these class-arbitration waivers unconscionable. You can read the rest of the story here link.

The 100 Most Useful Web Sites — All Money Related

Liz Pulliam Weston, one of the best personal-finance writers extant, has compiled a list of what she calls ‘the 100 most useful Web sites.’ I’m constantly on the prowl for information — as are most of my readers — so I figure this will make a great Saturday blog entry. By the way, Liz included CreditMattersBlog.com on the list. Thanks, Liz! I was included in the ‘Best sites for managing your credit’ category. From the column:AnnualCreditReport.com. This is the government-run clearinghouse to get your legally mandated free credit reports — you get one per year each from Experian, TransUnion and Equifax. Accept no imitations.CardRatings.com. This site does more than highlight some of the best available credit card offers. It also advises users on how to best manage their credit, pay off debt and deal with credit crises. LowCard$.com and Index credit cards are good to check, too.Credit.com. Two of my favorite credit experts, John Ulzheimer and Gerri Detweiler, contribute to this site, which educates users about all things credit-related.CreditCards.com. Former Bankrate.com editor Dan Ray has added smart, timely content to what was once just a collection of credit card offers. You can search for those here too, of course, but also check out the breaking news stories, the advice and the expert Q&As.CreditMattersBlog.com. Run by a former Wall Street reporter and soon-to-be lawyer, this blog tracks changes in the credit markets and has broken more than a few stories, including the one about American Express paying some customers $300 to close their accounts.myFICO. If you’re going to pay for a credit score as opposed to a credit report, which you should never pay for, you might as well get a FICO, which is the scoring formula most lenders use. This is where you can buy FICOs for Equifax and TransUnion. The third credit bureau, Experian, no longer sells FICO scores to consumers. The site also has a lot of great information about how your scores are figured, what interest rates your scores qualify you for and how to improve your scores.I visit quite a few of the sites on Liz’s list. Still, that’s just the credit section of her list. Looking forward to exploring some new ones outside of the credit area. Do yourself a favor and check out the other 94 sites that made Weston’s list.Read Liz’s story here.

The 10 Most Important Stories Written By CreditMattersBlog.com

This blog entry is inspired by a comment that one of my readers made to me a few days ago. This reader, Zach, said that a particular story I did more than three months ago was one of my more ‘educational and unique’ blog entries see Zach’s comment here. That got me to thinking. I’ve written a lot of stories during the past five months. Indeed, there are now some 235 stories on this site. Of those 235 stories, there are some really fundamental stories. Some more important than others. In light of Zach’s comment, though, I thought it would be a worthwhile project to highlight ten of the most important stories that I’ve done at CreditMattersBlog.com since July. My list moves from ten down to one with one being the most important. 10. When it Comes to Credit, it’s Always Business link9. Lowering Your Credit Limit is Stupid plain and simple link8. Why You Need a Credit Union Relationship link7. When Should We Start Teaching Our Kids About Credit?link6. Want to be a FICO High Achiever? Do What They do link5. If Your Relationship Ended Today, Would you be Prepared?link4. Paying in Full is Not Only Good For Your FICO Score — It’s Good For Your Piggybank Too link3. During the Credit Crunch, Work That FICO Score link2. If You Don’t Have A Credit Plan, You’re Doing Something Wrong link1. Utilization: What It Is And Why It Matters link

10 Credit Questions and Answers at CreditMattersBlog.com (October 30, 2008)

As I have said before, I can see how my readers find CreditMattersBlog.com. I don’t collect any personal information, but I can see search terms that people use to find the site. This information is like the center of Lifesavers candies. Or doughnut holes. Rather than letting them fall by the wayside, I figure that I should put these search queries to good use. Here are the game rules: I will edit search queries for syntax purposes. Otherwise, I will leave them alone. I’ll also phrase queries in the form of a question whenever possible. By request, these Q&As will now be published whenever I have received 10 questions through Google, Yahoo, and AOL searches.Q: How to keep credit card companies from reducing limits on inactive cards?A: That’s not your biggest worry with inactive cards. What most people should worry about is having the account closed. While I am sure that inactive cards can see a reduction in limit, I would think that the more common result would be an account closure. If you don’t want the account closed, be sure to use the card periodically.–Q: Keep getting denied for credit card — serious delinquency.A: In this credit environment, get used to it. Card companies are finally doing some real underwriting and risk management. During 2006, you could get a card with a serious delinquency. Now, though, it’s a much different situation. Card companies are reining in credit limits and they’re taking adverse action on those who have blemishes. There is also a compound problem here. The serious delinquency is preventing you from getting a new card, but the new inquiries are now damaging your chances as well. Those new inquiries make it look as though you are seeking new credit. If you have enough new inquiries, it will make it look as though you’re desperate, too.–Q: Should I call Nordstrom after applying for a credit card?A: Nordstrom takes its sweet time with card approvals and denials. Expect to hear something from Nordstrom within 7-10 days. However, if you are eager to find something out, feel free to call three to four days after you submit your application. Nordstrom may be able to give you the status of your application at that time. You can call using this phone number: 800-964-1800.–Q: My credit is shot.A: Sorry to hear that. I wrote a story a few months ago regarding shot credit link here. Some of my readers may find it useful.–Q: How to reduce credit limits without hurting credit score?A: While I don’t generally advise people to lower their credit limits, if you are intent on doing it here’s what you do: You’ll need to reduce your spending. The key is to keep your utilization down. You can only keep your utilization down when you spend less. When people reduce their limits, they’re essentially making it more difficult on themselves. I wrote a story on reducing limits link here back in July. Give it a read. –Q: What interest rate is better — .99% for a limited time or 5.99% until balance is paid off?A: This is where the calculator comes in. If you can pay off your balance quickly, then the 0.99% interest rate will likely work best. However, if you KNOW that you won’t be able to take advantage of the 0.99% rate — because your repayment schedule is going to be drawn out — it may be that your 5.99% rate will do the trick. Figure out what the 0.99% rate will go to when the promotion ends. Then figure out how long you think it will take to pay off the balance. If you estimate that you’ll save more money with the 0.99% rate plus the go to rate, then opt for that. If the 5.99% rate pencils out, then go for that.–Q: TrueEarnings American Express vs. USAA American Express? A: I am finally starting to see more questions like this. People are getting more shy about American Express, so they are looking for cards that use the American Express payment network. USAA underwrites the American Express card that it issues. The True Earnings American Express is underwritten by American Express in New York. The American Express in New York is the one that loves to do credit limit decreases and financial reviews. USAA, on the other hand, doesn’t roll like that. Now, there are differences between the cards. And they’re big differences. The TrueEarnings card is geared toward Costco shoppers. ‘The TrueEarnings Card serves as both your American Express Credit Card and your Costco membership Card,’ according to American Express. What’s more, there is no annual fee on your TrueEarnings card if you have a paid Costco membership. Additionally, you get a rebate of 3% for gasoline, 3% for restaurants, 2% for travel, and 1% everywhere else, including Costco, with your TrueEarnings card. The USAA American Express card, though, doesn’t offer a lot of rewards. But it will allow you to shop where American Express is accepted, including Costco. For people who don’t want to do business with American Express in New York, but who still need an American Express card to shop at Costco, the USAA American Express will do the trick. Just don’t expect a whole lot from the USAA card in terms of rewards and rebates. –Q: Should I request a credit line increase or get a second credit card?A: I always prefer to get a credit-limit increase. If I get a second card instead, the new account will bring the overall age of my credit history down. I’ll also get a hard inquiry for the trouble. With a credit-limit increase, there is a chance that the card company won’t pull a hard inquiry check with your card company to see what its policy is. And I won’t have to worry about a new account showing up on my credit report. Therefore, my general rule is this: go for a credit limit increase first. If that doesn’t satisfy your need for more credit, then perhaps you might go for a second card.–Q: Preselector HSBC?A: Yes. HSBC has a card preselector that will point you to cards that HSBC thinks you would likely qualify for be warned, though, that there are no guarantees of an approval. The HSBC preselector will ask you for some basic information and it will require a credit pull though it will be a soft pull that won’t hurt your credit score. You can find the preselector here link here.–Q: Authorized user on maxed out account.A: If you are an authorized user on a maxed-out credit card, your FICO score is likely being harmed. Rather than go into a long spiel about the perils of this situation, you should read my primer link here on authorized users. Credit Matters BlogREADER ALERT: For more credit questions and answers, the entire 10 Credit Questions & Answers index can be found here link.