Monday, July 28, 2008

American Express -- The Game Plan

American Express cardmembers: you're being watched -- closely. That's the takeaway from American Express's second-quarter earnings conference call, which was held July 21.

Chief executive Kenneth Chenault, responding to a question from an analyst, said that American Express has been targeting cardmembers for credit-line reductions who live in some of the most challenged real-estate areas. The targeting, though, has been "very, very surgical against those customers that we believe, based on our modeling, have a higher risk," Chenault said. But it's not just real-estate hampered cardmembers who are being scrutinized.

Daniel Henry, chief financial officer, said that American Express continues to "see the big significance in geographies where housing prices have fallen the greatest, but recently we have actually started to see a greater impact in customers who were in that middle cycle band. Generally it is customers with low FICOs where you see the greatest impact and we are certainly seeing it there." But, he added, "we are now seeing it creep into FICO scores of people between 650 and 750."

In other words, folks, American Express is monitoring the situation closely. Its models are scouring customer lists, looking for any sign of distress. Knowing this, it's not surprising that there has been an upswing in the number of American Express cardmembers who have seen their balances "chased." This happens when you pay off part of your balance and American Express reduces your credit limit to just above your new balance. So-called balance chasing makes the customer look as though he or she is maxed out on the credit card as well, which hurts the customer's FICO score. It's bad news for the customer.

So what do I go out and do -- about 24 hours after the conference call ended? You can see this coming from a mile away, huh. I applied for an American Express card, of course. Even in the face of all this American Express doom and gloom, I figured that there was no better time than the present for me to grab my first American Express card. My scores were solid (somewhere between 740 and 760) and I was applying for a charge card (as opposed to a credit card).

My thinking, leading up to the application, went something like this: I don't live in an area of the U.S. that has been hit hard by real-estate issues. In fact, the real-estate market where I live is holding up remarkably well. Give me a point. Next, my credit history is lengthy and my record is strong. Chalk up another point. Rather than applying for a credit card (which would be assigned a credit limit), I decided to go for a charge card. Charge-card purchases must be paid off -- in full -- every month. American Express won't need to monitor my month-to-month balances. There won't be any. Give me another point. I plan on using the card regularly, which is what American Express's "spendcentric" business model (use it or lose it) prefers. Give me yet another point. In sum, I figure that I look like American Express's model customer. Not surprisingly, I was approved instantly.

By the way, I fully expected the approval. As part of my homework, I learned that American Express has historically been more lenient when it comes to charge-card approvals. During the second quarter, charge-card applicants (who were approved) had, on average, a FICO score of 738. The average credit-card applicant, meanwhile, had a score of 750. (Note that American Express does not rely on FICO scores exclusively to approve cardmembers; instead, it uses its own internal scoring system, which gives FICO between 20% and 25% weight in the internal-scoring model. The source for the 20% to 25% figure comes from American Express's August 6, 2008, Financial Community Meeting. The figure was given during the Question and Answer portion of the conference call.)

Here is the FICO chart that American Express used during its second-quarter earnings conference call:

(If you're interested, here is the pdf file to the rest of the slides that were presented during the earnings conference call. In the meantime, if you are an American Express cardmember -- or thinking about being a cardmember in the future -- you should absolutely read the transcript from the earnings call. I was able to glean a ton of information about the company's cards and philosophy. It can be accessed here.)

EDIT (August 7, 2008): Since publishing my original blog entry, American Express has rolled out another presentation. The company held a financial community meeting on August 6, 2008. During that financial community meeting, Al Kelly, president of U.S. Card Services at American Express, presented his view of current market conditions. He zeroed in on American Express's US portfolio. One particular slide (picture below) was interesting.

Look at some of the card actions that American Express has been taking in its card portfolio. Bullet point five means that American Express is not tolerating people who don't use the card. Additionally, American Express is stepping up its monitoring of those who have high limits. I haven't changed my stance. Watch your back when it comes to American Express. They've got a microscope on everyone. If you are interested in hearing the conference call, here is the link (2 hours 42 minutes).

If you'd rather read the transcripts from each of the presenters, you can read them here (Ken Chenault), here (Al Kelly), and here (Ed Gilligan). The transcripts, meanwhile, do not cover the Q&A portion of the call. You'll have to listen to the audio if you want to find out what was said on the Q&A. END EDIT.

Just as an aside, American Express rolled out its first charge card in 1958. From the beginning, American Express has always been a paid-in-full kind of outfit. That's its core competency. It stayed that way until 1987, when the company unveiled its first credit card (a card that could be paid off over time). When I applied for the charge card last week, that's exactly the kind of information that was floating through my mind. I wanted to resemble what I figured American Express would classify as its classic customer. As a result, I felt that getting a charge card, which I'd have to pay in full each month, was the right move.

As for my friends who already have an American Express relationship, I'm frank with them. No one is immune from American Express's risk modeling right now. Still, I am telling them to keep balances low throughout their entire credit portfolio (American Express does a lot of account reviews). I'm also recommending that they keep no balances on their American Express accounts. They should also carry a backup card or two (Visa, Mastercard, or Discover) just in case American Express shuts their cards down at the most inopportune time (like when you're on vacation in Europe, for example). Moreover, I'm telling them to keep their American Express cards active. In essence, I think the best course of action, during this difficult credit climate, is to look as much as possible like the American Express customer of 1958 to 1986.

I've got my American Express game plan in place.

Do you?

Related Articles:

•Read More American Express Stories Here


Anonymous said...

You do make some solid points in your blog. I certainly commend you for doing your homework before applying. You know what position you are in and what they are looking for and what they are scrutinizing. Good.

However, would you agree that we (consumer) are in an extraordinary set of circumstances these days? While your game plan makes sense and mitigates unnecessary risk, there is no guarantee your account is safe or beyond reproach. Just because the CEO looks at the situation at 10,000 feet and offers his views, that does not necessarily translate into the day to day operations of US Card operations.

I am speaking as someone who was recently the recipient of a financial review after being a cardholder for 7 years. I closed my accounts and vowed never to return. It was an awakening.

Wish you luck. Sounds like you made an informed decision.

Credit Matters said...

I would absolutely agree that we are living in a difficult credit climate. What's more, I absolutely agree that none of us are immune from American Express's wrath. Indeed, I said as much toward the end of my piece.

No one (other than AMEX) knows what triggers these financial reviews. I'm simply doing all that I can to avoid one of these intrusive reviews. I'm not interested in having AMEX scrutinize my tax returns, either.

But you're right. No one is beyond reproach. I could do everything that I think is safe (pay in full, keep low utilization throughout my credit card portfolio, etc.) and I could still succumb to an AMEX financial review.

Thanks for the post.

Credit Matters said...

By the way, for those at home who don't know what a financial review is, let me explain.

American Express suspends your accounts (usually without notice). They then request two years' worth of tax returns. Worse, instead of you faxing them in yourself, American Express asks you fill out IRS form 4506-T (line five), which gives them direct access to your tax returns.

Even if you are currently making more money than your previous IRS returns indicate, American Express doesn't care. It's only interested in those returns.

After you've done all that, the waiting begins. The financial review department often takes its sweet time in reviewing your documents. In the meantime, your accounts remain suspended. If you don't have any backup cards, you could be in a real pinch.

Finally, there's no guarantee, even after complying with the terms of the financial review, that your accounts will be left open. American Express has been known to shut down the accounts.

If you decline to allow American Express to conduct a financial review, American Express will shut down the accounts.

All and all, it's not much fun.

Credit Matters said...

American Express is reducing lines and increasing lines. Just as they've always done. I have no way to know if they are net long (giving more increases) or net short (cutting more lines) right now. But this much I do know: American Express is watching ALL of its customers very, very closely right now. I imagine they're on high alert. Indeed, when you read the transcript, you get the impression that they're micromanaging everything. The tone of the call was interesting.

Still, that did not stop me from applying for a card. I carry no balances. I have no utilization to speak of (other than my normal monthly purchases).

As for the step-up in the reserves, that has more to do with the amount of customers that are going 30-, 60-, and 90-days late. American Express has said that it believes that many of these customers will be uncollectable. As a result, it believes that they'll need to charge off a lot of these during Q3 and Q4.

Ken Chenault and Daniel Henry both mentioned -- several times -- that they're being surgical about reducing lines. They were talking about not using blunt instruments in geographies that have been hard hit. They don't want to upset customers when it's not necessary. Carpet bombing an entire region (like California and Florida) would not be smart. As such, American Express is simply going in with a scalpel and cutting people on a case-by-case basis.

Does it make sense to get an American Express right now? I think if you look and feel like American Express's ideal customer, you should not worry. If, however, you are a borderline candidate for the card, you might think twice. As for current customers, just mind your Ps and Qs. Do what you can to stay under the radar.

We're living during an interesting time.

A Texan said...

Great blog today. You know, I've been waiting and improving my FICO scores so that I could apply for a AMEX card but after reading this I am sure that I will scratch them off my list.

I am not "feeling" them (AMEX) viewing my previous tax returns. Though a person may sign that form that you mentioned, I just think they are going overboard.

I will however continue to get my credit plan together so that I can shoot for Penfed, NASA, etc.

Looking forward to tomorrow's blog!

Credit Matters said...

Texan, first things first. Thanks for reading my blog.

Now on to business. It's not my intention to scare people away from American Express. I'm merely doing my part to help make you an informed applicant or cardmember.

As for the financial review that American Express conducts, a lot of people are turned off by it -- even when they do decide to comply.

I think one of the worst things about the process is that American Express doesn't take current tax returns into account. It seems to have a real penchant for using older ones. Whatever. Doesn't make sense, but, hey, it's American Express's game.

Finally, glad to hear that you are getting your plan together. You mentioned that you are angling for Penfed and NASA, two solid credit unions. That's great. I have been happy with both of them.

Tomorrow's column, by the way, is all about credit unions. Be sure to read it.

Take care.

modestexpert said...

I've written about this elsewhere, but having just completed an excrutiating 2 month process of review during which my accounts were initially shut down, I appealed and won, and the accounts are now up, I must say I am very unhappy with American Express and will be curtailing my business with them substantially. I would suggest to people:

1. Diversify your credit and don't assume Amex credit is solid. It can be summarily curtailed, COMPLETELY, at a moments notice.

2. If you are subjected to this process, know that is can take many weeks, in my case about 5 weeks for an initial decision, and 3 weeks for the appeal to succeed.

3. You CAN appeal; you need a strong case, but it is doable. In my case the IRS simply had not processed my returns. Amex refused to wait on pulling the plug on my accounts, and did not inform me of the appeal process. After several calls back to seek options (as this credit is very important for my business), one fellow when asked agreed that yes, I could appeal, and he would be my agent for that (and he was both reasonable and helpful). The agent handling my appeal did tell me when it was done that it was in truth very unusual for a decison to be overturned, so don't be overly optimistic on this front, I would suggest.

If interested, you can read the long saga at flyertalk, under the membership rewards forum.

Credit Matters said...

Modestexpert, I have read your open letter to American Express. I thought it was well reasoned and well articulated.

Financial reviews at American Express are a mess. The department, from what I heard, can be unbelievably rude. Robotic-like, if you will.

Your point about diversifying is a good one. That's exactly what I said in my blog entry. Have a backup or two (or ten). There is no telling when American Express will shut you down. Their shoot-first-ask-questions-later approach leaves a lot to be desired.

I'm a lurker over at Good, solid information there. Tell your buddies over at Flyertalk that I send my best.

Finally, modest, good luck on getting your rewards points reinstated. I'm real curious as to how that will be dealt with.

Please come back and update me on the situation after it gets resolved.

Take care.

modestexpert said...

This morning my points were reinstated! In short, I think I raised enough of a stink on the phone that they decided to reinstate without further argument, even though I was initially told that 'wasn't possible'! Interesting how the impossible sometimes happens...

Any idea why my threat on would have been shut of for new replies?

Credit Matters said...

Modest, that's great news about the points being reinstated. Glad to hear it.

As far as I can tell, you can still post on creditboards. Check again.

modestexpert said...

Maybe it's just that I'm a newbie on the board, and so I can't post right now...

I submitted a post on the points being reinstated an hour or so ago, but it hasn't gone up yet. On my screen it says "no new posts" on the envelope next to the post. Just not sure what that means -

Thanks for your great blog - I thought your article on Amex was excellent.

Credit Matters said...

Hey, that must be it. Because you a new poster, you are probably being moderated right now. I think after you have enough posts, you will have full posting privileges. Just guessing here.

And thanks for reading the blog. Glad you found the American Express piece "excellent." I try my best.

You're welcome any time.

modestexpert said...

Hi again,

Well, I can't message or do anything on creditboards, but am obviously legit - can you get them to greenlight me given your long standing there?

Also, the thread is now closed, just when it was beginning to hop - any idea what is up with that?

Any folks not wanting anti-Amex sentiment to run too strong that are in charge?


Credit Matters said...

Looks like someone closed that thread over there because of some religious comments that were made.

Politics and religion are strictly forbidden there.

Nothing we can do about it.

modestexpert said...

Well that's beyond lame to let any random comment shut down a thread that people are interested in. What's the freakin' point of the board?

What is the next most trafficked credit board?

If there isn't one, wanna start one?

That policy is just unacceptable, and makes them Yahoo's. It's one thing to lock the post temporarily... Hey, this is like Amex!! They are the Amex of credit boards!!

Credit Matters said...

I'm not part of management there. It's their policy. I don't know what the next most-trafficked board is. I like creditboards. Occasionally a good thread gets closed, but I'd say that they're pretty lenient -- with the exception of the religion or politics stuff. That's where they draw the line.

It's their sandbox, modestexpert. Just like this is my sandbox.

Feel free to post here anytime.

Thanks for reading.

gmintexas said...

Very interesting article, thanks for sharing. I,like you, applied and was approved for a gold card two weeks ago. Two things are bothering me about this card before I start to use it:
1)How it will be reported on my credit report? (You answered this qestion at CB, but can you elaborate it a little bit?)
2)The Amex FR is a crazy business that I wouldnt want to get myself involve with. Even though you said it happens mostly on their credit cards, I got info that they do it on charge cards too. A friend of mine has a green charge card and has been subjected to FR. They asked her to send her pay stubs. She has had the card for 3 years and have done it twice. Me personally I think it doesnt worth it. I am thinking of call them and cancel it before it reports to CRAs. What do you think?

Credit Matters said...

Gm, I never addressed who is more susceptible to getting a financial review. I said that no one is immune. There are no data supporting that suggests that credit cards or charge cards are more likely to get a financial review.

What I did suggest, though, is that I got the charge card because that's American Express's bread and butter. I am trying to look and feel like their idea customer. That said, I am still not immune from getting financially reviewed.

As for you closing the card -- before you even use it -- not sure why you would do that. Why did you get the card? You already knew about FRs before you applied, right? What has changed since then? Personally, I would use the card. Don't be in fear of your cards.

I will get to your second question in a bit. I have to run out the door right now. Back soon.

Credit Matters said...

GM, I am back (you know how errands are).

Anyhow, it should report as "open," rather than as "revolving." It's considered open because it's a charge card that gets paid each month. You can't revolve any debt (theoretically).

Your high balance will likely be the only thing that shows up. There won't be a limit (since it's a charge card with no pre-set limit).

I've noticed that my Nordstrom Visa Signature card reports as "open" on both my TU and EQ reports, which is good, since it doesn't hurt my utilization. However, on Experian, it shows up as revolving, which means that the card is factored into utilization there (that sucks). As far as I can tell, this is an Experian problem. For some reason, "open" accounts are showing up as "revolving." Oh, well. I am not going to worry about it.

In the meantime, see my earlier post about you not being in fear of using the card.

I wouldn't close it. I'd use it.

gmintexas said...

Credit Matters:
Thanks for your detailed answer. I'll read that article.

Credit Matters said...

Gm, glad my answer worked out for you.

Enjoy the other article.

Jim in the City of New York said...

This is an excellent article and Credit Matters, my compliment to you for not actually stepping upon one of my pet peeves and to finally provide some hard facts to a somewhat contentious issue.

Namely, that pet peeve is seeing many people, especially those who have virtually nothing to worry about (in terms of their credit life or otherwise), being hypersensitive to and overdramatic about American Express.

Best of all, some of them didn't even face some of the classic Amex tragedies (F/R, outright CL cut, balance chasing, complete suspension, etc.) OR even better, some of them are actually killing for an Amex card themselves... so everything's fuelled by their own speculation and fears.

See, I wish more people would just stop at simply warning people that American Express is watching us carefully: Don't do anything you wouldn't want to keep a paper trail with and you'll be fine.

Credit Matters said...

Jim, I wasn't always this way. For the longest time, I avoided American Express because of its FR tactics. But then, as you mentioned, I realized that I have nothing to worry about in my credit life.

Why not give American Express a chance? Sure, they're watching me. But all of my creditors watch me. See my column for this upcoming Thursday (September 4, 2008) for more on that.

So far I have been pleased with American Express. It's seen some nice usage during the past six weeks and I have had pleasant experiences with customer service.

So far, so good.

Glenn said...

As an interesting read, you may want to link into: It is a blog opinion linking American Express to profiling.

Josh said...

Marcus, if you login to your amex gold account online are you able to see a function to be able to check spending ability(aka a test a charge)? If so, care to post a screenshot of it's functionality?

There's always been a lot of ambiguity as to what no preset really means, if they will disclose what limit you have at any given point etc. might be a great article if you can actually get it out of them.

Credit Matters said...

Josh, I know that Amex does allow me to test a charge. However, I am a new user. I imagine that my limit wouldn't be very high right now.

Also, because of the story that is coming up on Thursday, I don't want to mess around with that button right now. Maybe down the road.

But do you still want me to post a screen shot of what the page looks like?

Josh said...

Sure, if you have the time.

Also, if you don't mind me asking are you charging significant purchases to it yet or are you going to use it lightly until you gain history with them? (I thought I remembered in some blog post where you said your running significant usage thru it now)


Credit Matters said...

Josh, I am putting $500-$1000 a month on it for about six months. Next year, after I leave school, I will likely put $1000-$2000 a month on it. Beyond that, I don't see myself using it much more than that. I'll never get to the point where it's my primary card.

Let me grab a screen shot for you, though. I'll post a link to my photobucket account in a bit.

Credit Matters said...

Josh, here is the link to the screen shot. Sorry so small. In order to get the width of it, it's been shrunk a bit.

Anyhow, it didn't let me put a dollar figure in. It just allows me to put my card in and hit the word "go."

It says that my charges will be approved unless the status of my account changes.

Josh said...

Thanks Marcus! That is very interesting that it does not allow you to do a test charge, it seems only certain card members can do a test charge online.

From what it seems, amex takes a 3 month average to get your spending limit. I would wonder if you decided to charge $2000 today if it would go through or not. I really hope one can call them and ask what their "limit" is at, because if they refuse to inform the consumer than I would be scared to use the card in person for always fear if I within my "limit" or not.

Credit Matters said...

Josh, I am told that you can call a customer service request and ask if a "specific" charge can be made. They'll tell you whether the charge would be declined.

However, I hear that people have had no luck ferreting out what their actual exposure limit is.

Josh said...

So it's not really a "no pre-set spending limit". It's preset. It's a credit "charge" limit or "exposure limit". Yes, Amex has been known to be more flexible in adjusting this limit often but it's certainly set, at least in one given moment. Yet, for some reason they decided way back when that at least for most card holders not to let the user know the actual limit at that present time.

BTW, as soon as my history builds up I will apply as well for an Amex Charge Card I just find the "limit" philosophy unique to say the least.

Josh said...

When you were activated the card were you transferred to a rep who asked you questions about your spending? Heard sometimes they do this.

Credit Matters said...

I activated the card online. Never spoke to anyone. Additionally, I have never been asked about my spending.

Anonymous said...

Are you not bothered by the $95 annual fee? said...

What $95 fee? I got the fee waived. What's more, the annual fee for the card is actually $150.

If you're paying an annual fee, you're doing something wrong. Ask for a waiver.

Anonymous said...

I was inspired by your article however after being told by Amex that their only personal 'charge' card was the Preferred Rewards Green Card which "offers enrollment in the award winning Membership Rewards program where you can redeem points for exceptional travel, shopping, and entertainment rewards. You earn 1 point for virtually every dollar you spend on the card, with no limit to the number of points you can earn. The card has no pre-set spending limit which means that your purchases are approved based on your spending patterns and other factors. The bill must be paid in full each month and the annual fee is $95."

I was put off my the annual fee. If I kept that card until I was 75, it would add up to $3,610 if they never raised the rates. I think I would probably end up divorcing the card and then my credit history would be shot. Better to find a card I can live with for the long run.

Anonymous said...

You got a fee waiver? For life? said...

Anon, you can also apply for a gold or platinum card, too. Those are personal cards as well. However, the annual fees on those are even more steep: gold is $125 (preferred rewards) to $150 (rewards plus) a year while platinum is $450 a year.

You absolutely have to use the benefits to make it worth your while. If you don't see yourself pulling more out than you are putting in, then the charge cards are not for you. I would avoid them if you can't get a return on your investment.

I'll keep asking for a waiver each year. If I can't get a waiver, I'll be forced to make a choice.

But I am with you and totally understand your rationale. You're 37 years old and it would cost you more than $3600 over the course of the next 38 years. Definitely something to think about. You'd probably do much better just sinking that $3,600 into investments. Compound interest is a wonderful thing.

Anonymous said...

My chat with Amex:
Rita N: Thank you for contacting American Express. My name is Rita N, how may I help you?
you : Hello. I am interested in the Amex Preferred Rewards Green Card. Does Amex provide fee waivers?
Rita N: For the Green card if you call in to apply we can waive the fee for the first year. Apply by Phone - 1-800-223-2670 said...

Anon, so you have a choice to make. You'll get a fee waiver for the first year. After that, you'll have to decide whether you want to keep paying the fee. Off the top of my head, I don't recall if you can convert a charge product into a credit product (that doesn't have a fee).

If you do call in, ask them about converting your account to a credit product after a year. Let me know what you find out.

Anonymous said...

After a little chat with Rita N at Amex, I found out that the annual fee will return because since there are no APR fees (because it must be paid in full each month) the only way for this card to make money off me is through the annual fee. So I have to determine what would be cheaper for me, paying an annual fee or interest on revolving balances.

Anonymous said...

Alex M: Thank you for contacting American Express. My name is Alex M, how may I help you?
you : hello. can a Amex 'charge' card be converted to an Amex 'credit' card if one prefers to switch in the future?
Alex M: No.
you : No? what would one do then?
Alex M: Apply.
you : apply for a new card and close the other?
Alex M: That is correct.
you : ok. thanks.
Alex M: Thank you for contacting American Express. said...

Anon, thanks for that. I appreciate it.

I was thinking about upgrading my card next year to platinum -- and the $450 fee. However, now that Amex has discontinued the domestic companion airfare program, I'll have to rethink it. said...

Anon, why would you revolve balances on the credit card? Pay in full -- as you would with a charge card -- and avoid interest charges altogether.

Anonymous said...

Alex M: Thank you for contacting American Express. My name is Alex M, how may I help you?
you : hello Alex. if i applied for a 'charge' card in 2008 and kept it until and then decided i was tired of paying the annual fee and wanted to switch to a 'credit' card, would i still be able to keep my credit history from 2008 with Amex?
Alex M: Yes you would.
you : really?! could you tell me more about this?
Alex M: Its your history with American Express it will always be there even if you apply for a different card.
you : so the front of my new 'credit' card would say member since 2008 right? how about my credit bureau report? how long will it say i have had the account for?
Alex M: That is correct. I don't know what the credit bureau report will say, we don't work with that here.
you : hmmm. thats what really matters you know.

Anonymous said...

you : next question: if i were to apply for the 'charge' card and we have a great relationship, (except for the annual fee part) and i decide to apply for the 'credit' card, are my chances of getting approved increased?
Alex M: Your application decision is based on a variety of factors including information you provide on your application and information from other sources such as consumer reporting agencies. You will have more credibility with American Express, however just like any other card being late or missing payments doesn't help.
you : okay, thanks for your assistance. said...

Anon, I must tell you that I am having a lot of fun with your posts. They're great.

I can answer one of the questions that Alex couldn't. Your new credit card, when you apply for it years from now, will reflect the age of your oldest Amex card. Thus, if you got a charge card in 2008 -- and then applied for a credit card in -- your new credit card would show a credit history dating back to 2008.

Anonymous said...

First, I would like to thank you very much as I have enjoyed your blog -- it's stellar--truly! I unfortunately was a victim of IDtheft, having no choice but to file CH.7. During that time, I applied for an AMEX (Gold) and was approved! Its been 2 and 1/2 years since the Discharge and it's still working--I use it regularly and pay my bills on time every month. Just recently got approved for a VISA (not a generous limit, but was assured in time I would be eligible for increases). I have always been an honest person, and paid bills on time. I am worried, however, that they may shut me down just because of the 7, rather than look at what I have been doing post Discharge. Any thoughts?? said...

First, congrats on moving past the Ch. 7.

Given Amex's recent behavior, I could not even venture a guess as to what they might do in the future. My suggestion is to continue using the card as you always have. You've been doing something right for the past 2.5 years. I'd keep doing it.

Wish I could give you more, but we're talking about American Express here.

Thanks for reading the blog, by the way. Much appreciated.

Anonymous said...

Wow, thanks so much for the prompt reply! I, too, am happy to put that in my past and hope it won't take the full 10 years to be were I once was...I have the AMEX, an auto loan and now 2 additional cards. Hopefully, nothing grimm will occur... All my best for a happy holiday season. Can't wait to tell my friends and family about your blog ( this is my very first time replying to a blog! Sad, but true :) ) said...

If I am near the computer, I reply to new comments right away. I am alerted to every comment that is posted on my site.

Just keep on keepin' on, Anon. We can't live in fear of our cards or our creditors. Of course, I also say that it's smart to diversify so that you're not at the mercy of your creditors. If you only had one card, with Amex, then you might have something to worry about. But it looks as though you've gone out and grabbed other cards too.

All the best to you. Happy holidays.

And thanks for spreading the word about the blog.

Anonymous said...

Hi--This is John again--quick question. Are these financial reviews for Gold charge customers or cardholders with revolving credit?? Thanks, Marcus! said...

John, financial reviews affect all customers -- not just particular cards. You might only have a charge card and you could be subjected to a financial review. Or you could have a credit card and that could subject you. American Express is going after the customer, not the kind of card you hold.

Anonymous said...

Wow, scary thought!! I understand why they must in certain circumstances, but why to those with a stellar payment history like the other blogger commented? I believe he had an account for 7 years and with no issues, to? Not fair in my opinion. And, if they do select you and they determine they are shutting you down, does that have an adverse affect on your FICO, or do you have to take a judgment shot and close it at your request? I just can't see why they would want to put someone under such scrutiny, especially if they pay in full each month. -John

Anonymous said...

So--I just got an email from MY FICO and went down 7 points becasue of the inquiry doe a visa with Nordstrom. Should I be worried? How long before it goes back up? It was at 657 and now 650 :(. It was my hope this would be part of my rebuild strategy--I have AMEX Gold, Student loans, auto loans and an account with a jewlry store. Any thoughts?? --John said...

John, inquiries hurt the most during the first six months. After 12 months, the inquiry doesn't hurt at all (though it remains on the report for two years).

If you get the new account, that will likely ding your score further -- but it's impossible to know by how much.

As for Amex and financial reviews, it can hurt your score if the card was helping utilization. Of course, I'd be talking about a credit card (with a limit). But if it's a charge card that gets closed, there likely won't be any harm at all. The card, though, will eventually fall of the credit report (about ten years after it is closed).

Anonymous said...

Thanks, I hope it goes back up...It went up a few weeks ago when I reopened the other credit account. Thanks, again. Hope my decision was a prudent one and it goes back up...In your opinion with your experience, do you think it will or did I screw myself with this one? -John said...

J, simply impossible to know the ramifications of credit moves like this. I would not sweat it. And you'll eventually get your points back.

Anonymous said...

Hi - I have just read the entire thread on your assessment of Amex and the current environment. Thanks, very helpful. My personal situation with Amex is interesting. My wife and I have a Gold Rewards card and a Green rewards card. I own my own consulting practice and use the green card primarily for my expenses associated with my business - travel, etc. Last year one of my clients went into ch. 11 and left me with about $5K in expenses on my card that they did not re-imburse me for due to their filing. I immediately called AMEX and told them of the situation and they put me on what they call their CARE program ( you can pay a balance off over time in increments directly out of your checking account, etc.) It took me about three months to pay off my green card with my own cash and upon my last payment, I received a letter from AMEX ending the CARE program and acknowledging full payment. Shortly thereafter, I received another letter from AMEX that they were capping my credit limits on both cards from "open" to $1100. When I called to inquire, the AMEX rep. told me that the,limits were set based on an "account review" and that in six months, with good payment history, I could call back for a limit increase. After six months of paying my card off in full every month, EARLY in many cases, I contacted AMEX to see if they could increase the limit on my green card at least by a couple thousand $$ because the small limit was making it difficult to use the card as I had been. I was told that it didn't matter that I had good payment history for the last 6 months, and that the ONLY way my limit would be increased would be after the next "account review" if it was determined appropriate by AMEX. I asked when the next review was scheduled for but the rep. could not tell me. Also, as I have been struggling to keep the card useful, there have been many instances where I am under my limit, have 0 outstanding balance, and my card will get declined when I try to use it. Every time I call AMEX and they tell me for some reason the card has been put on hold, or "while you are on the CARE program, your charging privledges have been suspended." even though I have not been on the program for over 7 months. Today I had the same issue, called AMEX, spoke to a rep. who told me that I was still enrolled in the CARE program and would be for an entire year, so I could not use my card ( even though it worked yesterday) He was no help, so I called back and spoke to another rep. who figured out that randomly, every so often, their "system" was placing my account back into the CARE program for no apparent reason. They assured me they would fix the problem within 24 hours, but when I asked if they could guarantee it wouldn't happen again, the rep. said, probably not - but just call back into customer service and we will take care of it.....thought this story would be interesting to you and your readers. Peace.

Best Credit Cards said...

Thank you so much for posting this. I learned a lot of things. Also read some of your postings- thanks for sharing them. Thumbs up!

Charles Clarke said...

Here's an analogy to a charge card with no pre-set limit versus a credit card with a limit:

Charge card:
You have a car without a gas gauge. There is a gas fairy who changes the size of your gas tank randomly. If it is increased, more gas is put in. If it is decreased, gas is taken out. This can happen even while you are driving the car. Most of the time, the size is about what you normally use for a week, but it can vary from 0 gallons to a month's worth. You have to refill the tank before it runs out of gas so you aren't stuck on the side of the road. At that point, you know how much gas you have put it, but not the tank size and the tank size may be decreased right after you have filled it up.

Credit card with a limit:
You have a car with a gas gauge in the glove box and a trip odometer and you know how big the tank is and your gas mileage. Occassionally you may get a bigger tank(even while driving) or be notified that the tank has been bent and won't hold as much gas. If you want, you can look at the guage and the trip odometer is reset upon filling the tank (or even just changed on only putting some gas in the tank).

Which car would you feel more comfortable driving? Oh yeah, in addition, the gas fairy car has a higher license fee ($75-$495/year) though it may be waived if you talk to the right clerk.

Call me paranoid, but I'm all for the car where I know the size of the tank!

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