American Express Judges You Based On Who Holds Your Mortgage, Where You Shop

Has your credit limit been inexplicably lowered lately? Well, it might not be anything personal. The problem might be with your mortgage lender. Or where you’ve been shopping. Or where you live. American Express, long rumored to judge customers based on this criteria, has admitted that it evaluates who you do business with and where you live when determining how much credit to give you, says MSNBC.

MSNBC says that a consumer whose spending limit on his Platinum Card was reduced shared the letter that Amex sent explaining their decision. Here were their reasons:

“Our credit experience with customers who have made purchases at establishments where you have recently used your card.”
“Our analysis of the credit risk associated with customers who have residential loans from the creditor(s) indicated in your credit report.”

MSNBC says the the experts they contacted confirmed that this is the first time they’ve seen these criteria as justification for a limit reduction. An American Express spokesperson said:

“We are looking at some other factors, too, in light of the economy. We are looking at consumers holding subprime mortgages (and) those living in areas where there has been a greater deterioration in home prices.”

The consumer profiled in the story says his mortgage is a fixed rate loan from Countrywide (now Bank of America) and that he uses the card to to charge travel expenses that are then billed to the clients of his consulting firm.

AmEx rates credit risk by where you live, shop [MSNBC](Thanks, Andrew!)
(Photo: damageinc86 )

Comments

Edit Your Comment

  1. sir_eccles says:

    So, what you’re saying is that I shouldn’t put my porn subscriptions on my Amex?

    • shorty63136 says:

      @sir_eccles: Hm. I dunno about that. Usually in bad economic times, people tend to spend more money on their vices (sex, drugs, alcohol). Perhaps Amex will look at this favorably. :)

  2. thesadtomato says:

    If travel expenses like hotels and meals aren’t ok, you have to wonder what purchases would make you look like a good credit risk.

    Credit card companies are running the numbers on where the worst credit risks spend their money, so if I happen to shop/spend the way they do, I’m screwed? Even when I pay off my balance every month?

  3. TheKel says:

    Had this exact thing happen with our Amex the other day. Our mortgage lender is Wells Fargo – one of the most solvent banks across this great land of ours. I am annoyed by this rather than inconvenienced, so I shouldn’t complain, but it is still a crappy feeling.

  4. HogwartsAlum says:

    Well, I was thinking about getting an Amex card because of all the good things I’ve heard about them here and from other people, but now I won’t.

    Stop judging me!

  5. SkokieGuy says:

    Yup. Amex, that used to be the gold standard in taking care of their customers not has a completely random and arbitrary method of managing their ‘risk’.

    My story:

    I saw advertisements for Amex cards with incentive rates for balance transfers. I have an Amex card already. They would (understandably) not give me an incentive interest rate on balance transfers that they were offering to new cardmembers. They told me to open a new Amex card instead and they would give me an balance transfer incentive. They even reviewed different offers (0% for 12 months, 4.9% fixed for the life of the transfer, etc.).

    I followed their instructions and was approved for a $10K limit with the incentive. I did a transfer of 6K to insure I was nowhere near the credit limit.

    Two weeks later, via letter, the balance transfer was declined, they said, based on information obtained in a credit report. It was a high risk transaction, they claimed.

    Keep in mind that:
    1. My card was already approved (based on my credit report) for $10K.
    2. My credit scores are over 800
    3. I have zero negative items in my credit report.

    So they will grant me $10K in credit, but if I use the credit, I am a risk. I could have gone to a store and charged $10K, but my scandalous, reckless utilization of 60% of my credit line for a balance transfer AT THEIR OWN RECOMMENDATION must not be permitted!

    I called to terminate the card, fully expecting they would reverse this laughable position. They would not.
    I cancelled the brand new card, possibly damaging my credit score for too many accounts and / or length of acount.

    • TheKel says:

      @SkokieGuy: Ugh, it makes me crazy they can do stuff like this. We are carrying a balance on our Amex right now that is being paid off immediately. There was a sense of urgency prior to our notice, but now we are pissed off.

      • SkokieGuy says:

        @TheKel: Good for you. I wonder, regardless of who our next Prez is, if credit card reform will be part of increased regulation and general banking reform.

        [Breathe is NOT being held waiting]

    • mugsywwiii says:

      @SkokieGuy:

      Obviously they decided based on your credit report that you would be an unprofitable customer. These teaser rates are obviously a sacrifice of short-term profit in hopes of obtaining long-term profit, but a lot of people just keep shifting their balance to new cards, costing different companies money until it’s all paid off. No credit card company wants someone like that as a customer.

      A couple of theories on why they might think someone will be an unprofitable customer when doing a promo balance transfer –
      1. Large number of cards, which might indicate that the person takes advantage of promotions and never uses the card
      2. Low/no balances on other cards

      I have no idea why they decided you would be unprofitable, but surely they had a reason.

      Another way people take advantage of these promo offers is by applying for a ton of cards at the same time to get a huge amount of available credit, then they use balance transfer checks to put it all in an interest bearing account. Because the banks are all unaware of the credit you’re simultaneously obtaining from other banks, a person can obtain a huge amount of credit – I’ve seen amounts over $1 million. Obviously this is making banks more wary of people who take advantage of promo offers.

      • frodo_35 says:

        Its thir game and they have the right to decline you. However they should’nt whine when you play better then them.

  6. lightaugust says:

    I have the costco amex card, and use it for damn near everything to jack up the cashbackt, then pay it off every night using my bank’s billpay… is this not wise, then?

  7. U-235 says:

    Hmm… I haven’t had any trouble with my AmEx and frankly, I love it. I have the Blue Cash card have yet to find another card that offers better cash back – 5% on groceries, gas, and drug stores, 1.5% back on everything else. The max I’ve seen is 1% back on other purchases. Not to mention all the other little perks.

    • PeteyNice says:

      @U-235: That is only after you spend to a certain amount – I believe it is like $6,500. Below that threshold the percentages are a joke.

      • yetiwisdom says:

        @PeteyNice: You’re correct about the $6.5K threshold on the Blue Cash but for people like me who use it for a mix of business and personal expenses, the threshold is not hard to reach in the first few months of the year. I’ve posted on Consumerist before that I love AmEx and while I’m not thrilled with the practice described in the post, I have to commend them for managing their risk to the degree of granularity seen here as opposed to just cutting everyone’s credit. If you don’t want your credit card company knowing where you shop, use cash. Otherwise, you need to deal with the reality that they might slice and dice this info however they want to enable their business to thrive and prosper.

        And, maybe the people who are having their credit cut should have it cut? Do we dare profess, especially now, that people ought to have limits on what they can borrow, or is it too soon?

        Customers getting cut might also consider dropping other credit lines including inactive cards to reduce to total credit extended you you. I had a problem with Chase giving me a crap limit and closed an inactive card to get them to increase it.

        As long as AmEx keeps giving me the best Customer Service in the industry (and this has been my experience over many years of using cards from Chase, City, Wachovia, BofA, Discover, AmEx, etc., etc…) I’m sticking with them.

        • PeteyNice says:

          @yetiwisdom:

          Where you shop is one thing, but who has your mortgage? That smells of universal default which I thought was illegal now? And honestly, even where you shop is bothersome. The only thing Amex should be concerned with is whether or not the OP pays their bill on time. Beyond that, or the OP asking for a CLI, they should stfu and gbtw.

          • yetiwisdom says:

            @PeteyNice: Maybe I’m a cynic but I think that anyone actively using credit has to assume that everone in the food chain has access to and will use whatever lives in your credit report and whatever transactions go through them. I don’t like the loss of privacy but it’s the price we pay for a 30-day float, convenience, protection, and the cash back.

            Again, if you don’t like it, use cash or talk to your representative for legislation preventing it.

    • Hands says:

      @U-235: I wonder if they’ll give me cash back if I use the card to buy American Express stock. Of course, the stock has done so poorly they’ll probably lower my credit limit if I do.

  8. FatLynn says:

    I wonder what merchants are on the blacklist. Aldi is the first thing that comes to mind, but that is purely speculative.

  9. highmodulus says:

    Long time Amex gold holder. I have never had an issue with them, and when someone tried to scam me with a fake tip amount at a restaurant they dropped the hammer on them.

    Amex FTW.

  10. satoru says:

    Personally I always thought Amex should get rid of their credit card line and go back to providing only charge cards. I thought offering credit cards diluted their brand image.

    • SkokieGuy says:

      @satoru: And their brand image is important to you why?

      Do you somehow feel your personal status as an Amex cardmember is reduced because Amex also offers credit card?

      Wow.

  11. satoru says:

    The other thing is that my Amex card is the only one I don’t have to ask ‘permission’ for to use it overseas. All my other cards require me to call ahead and make sure my purchases in Europe and Asia don’t flag their system. My friend would get his card locked for a week whenever he used his MBNA card in Canada for christ sakes.

    • scoosdad says:

      @satoru: Purchases in Europe and Asia or Canada? How about other states here at home?

      I once emailed Chase to let them know I’d be travelling to another part of the country and their reply was, “OK, but we reserve the right to decline your charges from those locations anyway!”

    • stevejust says:

      @satoru: I had the opposite experience with AMEX. My travel agent tried to book a flight for a business thing using my Corporate card, for a person traveling from Italy to the US, and AMEX declined it. Maybe it was ’cause it was a $7,000+ first class ticket, dunno. We couldn’t figure out what was going on until we called and sorted it all out.

  12. hills says:

    I love my amex – no problems & get lots of compliments on my cool blue card – I just wish more places accepted amex!

  13. Chaluapman says:

    Let just lowered my credit limit $1800, I always pay on time and I always pay 3 times more than the minimum payment. I’m glad to know that my 1800 is keeping them safe.

  14. mugsywwiii says:

    They’re doing what they can to manage their risk, and there’s nothing wrong with that. I’m sure they have data from millions of customers and billions of transactions to back up their claims. Even if they don’t have the data, there is nothing wrong with arbitrarily lowering someone’s limit.

  15. ohiomensch says:

    AMEX practices “Balance Chasing”, if they think you are any kind of risk, they will lower your limit to about $100 over whatever your balance is, and then all your other credit cards will up their interest rates based on your credit usage ratio.

    So suddenly that $10000 limit you had gets reduced to 2000, and if your balace is 1900 it looks like you are maxed out, and other cards respond by charging you more. Nice going Amex.

  16. ChapstickAddict says:

    The consumer profiled should really be using a business card for the type of expenses he is talking about. Even if it is a personal consulting business, it is a smart idea to separate that from your personal finances. I have not yet had any problems with my business Amex account.

  17. nsv says:

    In the 20 years that I’ve had my AmEx Optima card (um, I got it when I was six, yeah, that’s it,) I bought a house and sold it and have gone back to renting. My limit has only gone up. I’ve had to turn down limit increases because I never want to owe as much as they’ve offered on a credit card.

  18. bohemian says:

    Having these retailer blacklists be leaked to the internet would be extremely useful. Right now people do not know what actions could put their credit at risk, and possible create other lenders jacking their rates.

    It is the same as credit scoring companies refusing to let people know what they really use as criteria. Were all playing a game we don’t know the rules to.

    Paying your bills on time seems to have been just randomly tossed into a bigger mix.

  19. Sampsonian says:

    It seems like the profiled consumer had his spending limit explicitly reduced on the charge card (the article refers to the three accounts he had, two of which were canceled and the remaining one being the Platinum). I know that despite their claims to a “no spending limit,” AmEx sets arbitrary limits on the charge card, but I suppose they’re setting a hard limit.

    Article after article on this topic talks about how this is perfectly legal for AmEx to do, but from the consumer’s perspective, isn’t this fundamentally unfair? The common complaint is that by reducing spending limits the credit utilization percentage shoots way up, bringing credit scores down. Consumers’ credit scores took a hit because, rightfully or wrongfully, AmEx got skittish, all for shopping at the wrong places or lives in a wrong part of the country.

    I wasn’t following any of the congressional hearings of the credit card companies, but it seems like additional rules limiting the companies’ abilities to take unilateral action like this is the only answer…

  20. dougp26364 says:

    AmEx, without warning or even notification, canceled my card. I found out about it when I tried to use it and the girl behind the counter started cutting it in half. Their explanation was a little bit south of polite.

    Not a problem for me. I just switched to Diners Club and use it for all my travel expenses. Even in the credit crunch I’d never consider returning to AmEx.

  21. regenerator says:

    Hmmm… AmEx just upped the limit on our blue card by about $3000, bringing the total credit line to about $16,000. Seems about every six months they bump the limit up a little more.

  22. Marshfield says:

    Can we find out where “you shop” that causes them to lower your credit limit?

    I can understand a sketchy mortgage company, but is shopping at Wal*Mart going to cost you?

  23. azntg says:

    Those of us actively participating in the credit discussion community (e.g.: CreditBoards) knew about this at least two-three months prior to this information hitting the mainstream media.

    Something was quite wrong at American Express. People with very questionable credit (some with FICO scores just below 600) were receiving Amex cards. Some of the long-time cardmembers with excellent credit faced suddenly decreased credit limits, intense scrutiny with the infamous Financial Reviews, charges would be inexplicably denied, etc.

    Some thought that the members of the community were a special case and didn’t think too much about it. After all, some people were racking up credit lines like there’s no tomorrow, taking advantage of BT arbitrage, etc. Apparantly, we weren’t exceptions.

    Among items mentioned in the MSNBC article and by some commenters, here’s a few additional nuggets:

    - With American Express credit cards, it’s best to treat it as a charge card.

    While it sounds counterintuitive (and the complete opposite of what certain other creditors encourage), it’s probably for the best that you pay in full, on time, every time with American Express. Avoid revolving balances, going for balance transfers, cash advances, etc. (which are like “speed traps” with Amex. You still won’t be completely immune from adverse action (if it does ultimately happen), but at least it reduces your exposure on the radar.

    - It is quite clear that American Express participates in first-purchase risk modelling (the first item you charge to your card will essentially dictate how long your relationship with Amex will last).

    Use the card in the wrong place for the first charge and see your card (credit and charge card alike) either closed or severely crippled (credit line decrease). Rumor is that Starbucks is a good place to make a first charge, but that’s just a rumor and nothing else.

    - American Express is a “spend-centric” creditor.

    They cannot make it any more clear and explicit. If you “attend” a conference/meeting that American Express sets up for other companies (many of those conference/meetings are publically accessible on your home computer, btw), you’ll hear the representative of American Express saying just that.

    They want you to charge a lot on their cards consistently (and pay it in full, on-time, of course).

    It’s like they’re a jealous creditor. Quite a few people who had their cards shut down in the credit community reported that they have not used their American Express cards often.

    - If you really need an American Express card (presumably for places that only take American Express, like Costco and a few odd shops/restaurances), but want to avoid some of the odd shenanigans that American Express participates in, I strongly recommend that you apply for an American Express-network card.

    They are NOT underwritten by American Express Bank, so the creditors are not quite as liable to pull all sorts of odd shenanigans that Amex plays. Bank of America, Citibank, HSBC, GE Money Bank issues American Express network credit cards. Charges run through the American Express network, but the card and the credit limit behind it is serviced that those financial institutions, much like Visa and Mastercard cards.

    Personally, I have no problems with American Express. I treat them with respect and they reciprocate it. So, both of us are happy (at least for the time being).

    However, I think they should stop forcing its cardmember to play a game of Minesweeper. Nobody likes to play a real-life version of Minesweeper with credit and finances. Either disclose outright which places are “frowned” upon or end this stupid gambit.

    • Sudonum says:

      I have had an AMEX card for nearly 20 years and never had any problems with them. They are my preferred card to use. Perhaps because I use my card in the manner suggested by azntg I am considered an “ideal” customer?

    • juri squared says:

      @azntg: Weird. I originally got my AmEx in order to purchase my laptop from Dell. I wonder what they thought of that?

  24. gruffydd says:

    I have the AmExOne Card…does it have a limit?

  25. consumerd says:

    AMEX, another reason why I dumped them over and over again. They are only good for a while, and then they just suck. Only good thing about AMEX is traveling abroad, if it wasn’t for that, they would just about have no use.

  26. Apparently, teaching Americans to buy everything on credit turned out to be a bad idea.

    Who whudda thunk it?

  27. lyim says:

    Sounds like a clear cut self admitted violation of Regulation B AKA Redlining.

    Targeting an are or not targeting an area based on geography is a big no no.

    • ameyer says:

      @lyim: So?
      It seems banks only follow federal banking regulations when the feds make them or when someone knows their rights.
      Unfortunately, the feds don’t seem to be making banks follow the law these days.

  28. fever says:

    I can easily see how a lender would look at this guy, someone who had a Countrywide mortgage AND frequently traveled, and think that maybe he wasn’t such an excellent risk. But what he didn’t include in his letter is that he also drops a couple hundred at Wal-mart every week, then puts dances on his card and finishes it off with 10 bucks at McDonald’s…

  29. grumpygirl says:

    You know, I wouldn’t give a flying fart what any bloodsucking credit card company does, but then there is that pesky FICO score. I have no interest in credit – not even a mortgage, but I do want to get good insurance rates and I don’t want to lose a job offer because of a FICO score that isn’t up to some arbitrary standard.

    They need to forbid the use of FICO scores for non-debt purposes. I shouldn’t be punished for opting out of this sick game.

  30. MarkMadsen'sDanceInstructor says:

    I’m always surprised that people like the guy in the article don’t bother try calling up the credit card company to see if they can get them to change their minds. It usually works for me, even if I have to ask for a supervisor some times.

    Moreover, a guy who is so desperately relying on his AmEx business card to survive month to month sounds like a credit risk to me. I would have cut his limit as well.

    The art of getting and keeping decent credit limits is simple. Always pay off your cards in full every month and don’t spend more money than you have. Its not exactly rocket science. If you’re barely getting by with the minimum payments every month, you really need to think about cutting those cards up.

  31. Keter says:

    I want to know how they can tell if you have a subprime mortgage. My loan originated with a local bank, but was bought out almost immediately by Countrywide – something I had no choice about and didn’t like one little bit. So because Countrywide bought my mortgage, now I’m in a high-credit-risk pool despite having a well-documented 30 year fixed rate loan and a property worth nearly $100K more than is owed – definitely NOT subprime?! What?

  32. HaukBomb says:

    I also just got a sudden decease on my Blue Cash Amex! Never missed a payment on anything since I’ve had the card and my credit score is better than ever. Credit crisis or no it feels like a slap in the face when you’ve spent years being a model consumer and paying everything on time!!!

  33. Anonymous says:

    I wish I had read this before I tried to reduce my Platinum card to a green one. they have done everything to ruin my credit. It’s taken 6 weeks just to close my account. they never took the $450.00 charge off my card, as they said they would. Not they have cut all my credit limits on the Costco and Delta Skymiles cards. They have a way of getting rid of customers that involves ruining their credit rating too.