Wild as it may sound, our preferred strategy is to spend wisely and not take the rejections too personally. To credit card companies, you're just a data point, not a person.

People are annoyed by lowered credit limits because they feel personally insulted, but because it can have a bad impact on your credit report/credit score. Having a lowered limit suggests you are a bad risk, which will make lenders cautious. One of the things credit scores use is percent of available credit used, with a lower percent being better. Seriously drop a credit line, and the percent goes way up, making the person look like a much worse risk because they are coming close to maxing out their available credit.

I can understand why lenders are being cautious, and would guess that they have some research to back it up, but I also understand why consumers' problems with this goes beyond feeling insulted.

@madanthony:

meant to say NOT because they feel personally insulted.

should have used that preview button.

I know I'm just fighting the data machines (which makes me rabidly angry in and of itself ... machines are not in charge of people, Skynet!), but these make me gnash my teeth with frustration.

Money-smart people shop at money-saving stores in a recession. It's not just broke people.

Money-smart people live beneath their means, which in terms of housing means not in the latest McMansion development. Not just broke people. And so on.

We live in an older, less-wealthy area of the city ON PURPOSE so that our mortgage is smaller and we can pay off our student loans faster and pay less in gas to get to work and help anchor an older city neighborhood. Because those kinds of things are important to us. It makes me absolutely CRAZY that making a money-smart decision could result in my credit limit being lowered.

And now AmEx is making me not want to make my next money-smart decision and buy a rental property near the college while the market is low. :P Stupid AmEx!

ive had my AMEX for years, its my first card, with a rather large limit. Because of crap like this, im scared to use it since i fear they may cut the limit.

but just having netflix autobill it has kept it fine.

Dear Amex: thanks for persuading me that I should ignore your ads at Costco encouraging me to become a customer.

How about "Dear Costco: thanks for your invasive in-store Amex advertising that shows you partner with scum-sucking, anti-consumer pigs like Amex. That alerts me to wondering what other bad, anti-consumer business deals you make in the back room."

Uhm.. while it might sting to be one of the people who gets cut back, why are you people pissing and moaning about a credit company trying to be responsible and limit their risk??

This is Barney Frank school of thinking that everyone deserves a ton of credit.

Just because the fat was thick during the boom years of credit, everything must come to an end. SUCK IT UP!

I love my AMEX Blue and the customer service when things go wrong is still top notch and the only people who top them are USAA.

From the article: "That said, if you have a high credit limit, that may make you a target, too. American Express has said it is keeping a particularly close eye on those customers."

Out of curiosity, what constitutes a "high credit limit"?

A/Ex is probably worried that those who Madoff ripped off might run up the card some month and leave the country with cases of Cristal, laptops, diamonds, Guess jeans, etc. And try to live a comfortable life in South America somewhere.

I'd be worried too if I were A/Ex of defaults.

I tell you what, you learn all you want about me. In your research you will find 1 -I hate AMEX and 2 -they can kiss my ass.

@Eyebrows McGee: I have asked questions like that of my lenders (basically asking them for more than just vague and meaningless answers), and they never want to answer the question. They don't want to give you a metric you can follow, because they'd have to actually abide by it.

I suppose you could run all kinds of aggregate statistics and find out neat things, like the people in Area A are more likely to buy blue shirts and the people in Area B seem to all have two cell phones per person. (I literally made up those two things.)

However, these statistics do not take cause and effect into consideration. Are people who shop at Wal-Mart bad risks and thus can't afford better, or are they trying to save money?

People who spend within their means don't make the credit card companies as much money as those who pay a lot of interest. Then again, even though people who pay a lot of interest make them money... doesn't the credit card company have to keep those revolving credit lines open? That has to be hard to do in this economic climate.

@Eyebrows McGee: money-smart people make money-smart decisions despite what others think of them.

screw amex. if you find a good investment, take advantage. renting to college students can be difficult (if that's your intention), but if you play your cards right, that's certainly a smart move.

@dreamsneverend: "why are you people pissing and moaning about a credit company trying to be responsible and limit their risk??

We aren't pissing and moaning because they are being responsible. We are pissing and moaning because the decision to cut your credit line negatively impacts your credit rating. Depending on your score, a few points could be the difference between a Good and Excellent credit score. That difference could save you .5% to 1% on your next loan. Which will save(or cost, depending on how you look at it) a lot of money.

But if you don't think a negative impact on your credit rating is a big deal, go buy your next house with cash. I dare ya.

@Eyebrows McGee: They don't want money-smart people as customers. Money-smart people don't go buy tons of expensive stuff they don't need on their Amex cards.

It sounds like good business practices to me. The kind that could have helped avoid the whole mortgage meltdown. It doesn't say that one problem and you are out. Statistically speaking the more different ways a lender evaluates you, the better chance that they won't make a bad mistake.

A reduction in credit limit is an incredibly tiny part of your credit "score", I wouldn't worry about it.

@Eyebrows McGee:

High Credit is relative to:

You business type/employer

Actual wages/earnings versus potential earning power.

Your expenses relative to actual wages and potential earning power.

Oh, and that little thing called debt.

No, the kind of "good business practices" that would have helped avoid the subprime meltdown would have been to avoid handing out huge credit lines *like candy* in the first place, then to treat your customers well (and not like a sack of shit as Amex is doing.)

@Corporate-Shill: Can we at least have a ballpark here? Is $5,000 high? $50,000? $500,000? For someone earning $60,000/year? someone earning $30,000?

@mac-phisto: "money-smart people make money-smart decisions despite what others think of them."

I know, but perverse incentives is part of how we got into this whole economic mess. And I don't think it's irrational in this economy to be worried about what "others" -- my financial institutions -- think of me. Particularly if AmEx's views on my spending are going to affect my ability to GET a mortgage. It just makes me pissy.

@CyrusOpeth: Wouldn't it be quite humorous if Costco was one of their black-list stores??

"Sign up at your local Costco for your brand new Amex! Oh, but if you actually SHOP there... well, we might have to cut your credit in half and blame the economy."

Maybe Amex is finally trying to kill their business from the consumer side versus the "overcharging businesses" side?

I didn't see any comment that addressed the actual meat of the story: why AMEX retracted their statement about cutting limits based on patronage at certain stores. Why they did this is quite evident to me, anyway...

Let's say you're AMEX, and you decide that Walmart or McDonalds shoppers are bad credit risks, so you use that as a metric for whose credit limits you should slash. Let's say you realize after the fact, that people were going to solve the mystery of which retailers were credit limit poison. Let's say your PR department is now full of holey seat cushions.

Why? Because those retailers who find out they are credit poison to their shoppers will retaliate. At bare minimum, they will stop accepting AMEX. More likely, the big ones will sue. That will open up the floodgates of litigation, and AMEX will lose money even if they don't lose the lawsuits. The publicity is already poison, and people either aren't getting new cards or are switching their daily activities to other cards.

Any way AMEX goes with this at this point is a loser, so they tried the weakest PR deflection of all - a transparent lie - hoping that it would stop some of the digging. It won't. AMEX somehow got into a position where it had overextended itself, and found it had to cut available credit, so it cooked up a scheme to use buying histories as an excuse, hoping to baffle consumers into submission. It didn't work, and now they are faced with bad publicity and the possibility that investigation will reveal a serious problem within their inner workings. The one thing they can't do to make this right is restore the credit limits - that was the only thing in this whole mess that was tied to a firm data point.

AMEX - your only win at this time is to admit that you've got yourself overextended, and this is how you're going to have to operate in order to survive the current downturn. Everybody's feeling that pain, and unless you've got criminal activity at the root of your issues, you might be forgiven.

Also, donsider "temporary" credit limits, clearly explained to the customers - don't cut the person's REPORTED credit limit, but place a temporary lower limit on the cards. This will prevent use above the threshold you must maintain and will not hurt your customers' credit scores.

@Eyebrows McGee: With common sense and financial responsibility such as you're displaying, it's obvious that you're a Bad Person. I'll bet you're on the no-fly list, too.

American Express seems to getting clobbered lately! Times are definitely hard, credit was pushed too far and now the cutbacks are painful for a lot of people (embodied by lower limits). I understand people's frustration, and it is partly Amex's fault for having over extended people's credit- so now they have to find an excuse to get it to a reasonable level- which is hurting customer satisfaction. If they don't cut credit, they would go out of business in this market. People are losing their jobs and charging up their cards and defaulting, reducing everyone's limit reduces their exposure to this. They may be taking drastic measures, but they'll survive this downturn- the same can't be said some others.

All that said, I love my Amex.

@David in Brasil: Not only that, but Santa put me on the Naughty List!

Ive been an amex card member for about 5/6 years both personal cards and corporate cards. After all the talk of raised rates and cut limits the past few months I have been paying attention to my monthly statements, and sure enough, this morning they raised my rate from 6.9 to 9.9. Watch out everyone.

@scootinger: Perhaps AMEX believes that they may have handed out excessive credit lines like candy and are trying to take steps to reduce those lines before it bites them in the ass.

Subprime lenders (yeah, I know they sold most of the mortgages they originated, anyway) can't go back and say, "You know what, we approved you for more on that mortgage than was prudent so we're cutting it back." AMEX can do something similar.

Why, exactly, is reducing a credit like treating someone "like a sack of shit?"

I love it when credit card companies get ripped for giving out cards to people "everyone knows" shouldn't have had credit lines so high, then get ripped for reducing lines "everyone knows" aren't too high.

Granted, they do some sleazy, if disclosed things, but on the issue of credit lines they seem damned if they do and damned it they don't.

Didn't Amex get a bailout?

[consumerist.com]

Amex sucks and it's all BS IMO! This is along the same lines that people with not so perfect credit are higher insurance risks. What a bunch of hogwash. Is lightning more likely to strike my house rather than my neighbors because I have bad credit?! It's another way how corporatism is taking control over America and is squeezing out the middle class until it will be non-existent.

I have AmEx Clear. It has a small limit, appx. 3K, as I've just started to build credit in the last 4 years. But, I have never had a problem using my card anywhere. I recently went to the Philippines, Japan, San Francisco, and I also frequent a bar and use this card there. I think my AmEx is one of the best cards in terms of Customer Service and Online Account Layout.

I would guess that AmEx is starting to see that some of their cardholders are starting to have some bad things pop up on their credit reports, or that the credit scores have started to drop as compared to where they where a year ago. I'm sure a foreclosure and several late payments to other lenders would drop your score and make AmEx think twice afteer doing a review of a cardholder. Similar to the universal default trick.

@verucalise: I'm in trouble then, I got the Costco AmEx with the rule that I would only use it at Costco.

There's no relationship to this thinking with where I live. Here, there is this real issue of supply and demand. I live on Cape Cod, and finding what I need is often an arduous task. We shop at Walmart on the mainland once every 4-6 weeks just to get what we need.

Seriously, the local Kmart has been out of socks since Thanksgiving. I needed a new DVD/VCR that actually can record without a cable box (not just an inline only version) and the only place who carried one was Walmart. (I was none too happy forking over the price they wanted either, but from what research I've done, the new import laws require digital tuners). Between Kmart, Sears, and Best Buy not a single unit meeting my specs was to be had. It's bad enough Circuit City tore down an old restaurant and built a new building only to never house it.

And please, no mocking my use of older technology. I prefer deciding what room (living, office or bedroom) to view a program in, and not be chained to one room because that is where the TIVO is...

Regardless, I used my AMEX to purchase the unit at Walmart.

@TrueBlue63: Okay, first off, it's your credit score, not your credit "score". Nix on superfluous "quotation marks".

Second, limits are only a small part of your score if you don't have any revolving debt. If you DO, then an enormous limit reduction like the ones Amex has been imposing on otherwise reputable customers can reduce one's credit rating significantly.

(Incidentally, too much available credit can actually hurt, so Amex might have done some folks a favor.)

@verucalise: You know, I'd totally walk in and ask about that, except that the last few times I've asked customer-facing folks about scandals, I've gotten blank looks instead of denials. Wholly unsatisfying.

@madanthony: Personally I am happy they are doing this kind of thing. My generation is going to be paying off their mistake for a long time and I want them to do everything in their power to prevent the mistake from growing.

@Eyebrows McGee: it shouldn't really affect your ability to get a mortgage, unless you're carrying debt. if you had a $20,000 line & no debt, you're utilization is 0%. if that line gets cut to $6000 & you still have no debt, you're utilization is still 0%.

if you're the type that actually uses the card & pays it off monthly, consider making biweekly payments to mitigate the effects that a "snapshot balance" might have on your utilization.

& if you're the type to carry a balance...you might have trouble getting a mortgage on an investment property regardless of what amex does.

i understand how you feel - i think what amex is doing is pretty shitty. i just don't think you should waste any sleep over it. either you're in good financial shape or you're not. one card's rash decisions shouldn't normally affect that.

@TrueBlue63: here's the thing: i understand credit matrices - i use them regularly. but whatever happened to credit history with a company? isn't that the best matrix?

sure, you can run all these statistical comparisons to extrapolate default data, but is it really optimizing your lending, or are you just taking the easy road?

i think what's making this so outrageous is that many long-time, faithful amex customers are now being affected despite years - decades even - of impeccable credit history.

this is a shotgun approach to responsible lending & whereas you characterize it as avoiding a bad mistake, i would say that it epitomizes one. i have a feeling a lot of faithful customers will be taking their business elsewhere.

What is wrong with them using spending patterns and other demographic data to determine your risk to the company? If I was AMEX I would be data mining everything I had on the moves my cardholders make and comparing that to the trends of other cardholders who have been problems in the past. Sure there will be mistakes and slip-ups, but in the overall scheme of things it makes sense for them to use all the data they can get to make sure they aren't going to get screwed over.

If over a few months a platinum cardholder goes from making $1000 purchases at highend clothing retailers and all of a sudden completely stops those purchases and starts making $50 purchases at the Walmart/Target/etc nearby then the cardholder probably had something happen in his or her life that is worth AMEX figuring out.

AMEX can deny the store shopping blacklist all they want to, but there IS that old adage about 'actions speak louder than words.'

@dreamsneverend: "I love my AMEX Blue ..."

This is a perversion I'd never heard of. I learn something new every day.

It's just not believable. Using the card negates the ability to use the card? Think about that for a sec. It's not a viable business model. In all the Q and A sessions with Amex representatives, they make it a point to say that this is one of the reasons they cut people's limits. Indicating, to me at least, that there is probably a more offensive reason that they are doing this, and where you shop is just a cover.

Surprise! people are upset with the fake reason. I don't think this plan was very well thought out.

@TrueBlue63: My credit "score" dropped 30 points when Amex lowered my credit line from 30% usuage to 98% usage. Can I opt out of the bailout? Especially the part of it where Amex got themselves declared a bank holding company to get a chunk of my tax dollars so they could do this to me.

@CmdX: Why they chose to shop at Walmart/Target/etc is none of their effin business.

@Eyebrows McGee: From other stories I guess it isn't much more than $10K if we're looking at the amount of credit folks have had before being cut.

@kaptainkk: People don't just change their spending habbits on a dime for no apparent reason, a dramatic shift in spending habits IS 'their effin business' because it is THEIR money that is on the line

not just amex doing this. usually places have the slightly thicker veil of "it's fraud prevention" up though.

@ohiomensch: A few things here- First off, complain to the credit reporting agency that AMEX is playing around with your 'score.' There is a chance they will remove the change.

Second of all, people get WAY too paranoid that any one action will change their 'score' in any one month. The number is constantly moving and its calculation by any one agency will almost always differ from the other ones. There could be a 30 point swing between your different creditors. If a company wants to do their entire business based on a calculated number and doesn't want to do any actual research then you have every right to go to another company that will.

Most stores accept more than just AMEX (in fact, many do not accept AMEX at all) and there are 30,000 groups that will give you a Visa or Mastercard with terms that seem to work better with your lifestyle. I would never recommend walking around with JUST an AMEX card without some Visa or Mastercard backup.

@Eyebrows McGee: Lets not blame the machines, they only do what humans have told them to. Lets blame humans. In fact, now I think about it, all the farked up stuff in the world is because of humans.

I do agree with what you said otherwise. And also that the rental property, if done right, is a great choice. Just make sure its either graduate students or professors or you have mommy & daddy frosh's credit card to charge the repairs to. Or another option would be to get a property management company to keep tabs on it. Yeah they get a cut, but sometimes its worth the money instead of the stress.