Friday, October 3, 2008

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

One of my favorite sites,, 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 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 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.

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Bob Wang said...

Boy, am I glad I didn't save THIS one for bedtime reading ;-)

Credit Matters said...

BW, nice to see you, pal.

For tomorrow I just have the weekend roundup.

Cosmo's Human said...

I remember not too long ago seeing a TV commercial for their "Open" card,I think that was the name, helping small companies with their needs. Now they are helping small companies by shutting them down and putting people in bread lines.

Credit Matters said...

American Express is on a rampage. I think back to that conference call in August -- when they said they were using a scalpel to root out problem customers. Doesn't look like they are using a scalpel to me.

Don Miguel said...

I think a better top left picture for this blog entry would be a centurion standing with his foot on a customer while yanking the dagger out of the customer's back, but I suspect that doesn't exist as a stock photo . . . yet.

Credit Matters said...

LOL. Not yet, DM. I was thinking about adding a sickle to the picture.

Anonymous said...

I think the whole RUMOR thread is simply his observation and his point of view. I don't feel like the poster is passing on something he heard. He never mentions " I heard " or " I was told etc..."

He simply states " It looks like...". That to me is an opinion. So I wouldn't think too much of it and just discuss it as he had asked :)

Credit Matters said...

Not so sure, Anon. This was the headline of the thread: Rumor: AMEX getting out of the credit Biz, They will go back to having only the Charge Card

There were no question marks in the post either. Seemed to be affirmative throughout.

It's a rumor though -- and, as far as I can tell, only a rumor being spread by the poster.

Anonymous said...

I am sorry I was foolish enough to blow an inquiry on an AMEX Costco card (739 EX FICO)... If I had been approved, I guess a CLD would have come my way.

Do you think there will be AMEX branded credit cards available for those who would like that logo on one card? In other words, would the AMEX cards from HSBC etc still be viable in your opinion?

Credit Matters said...

Anon, many people have Amex-branded cards. I have one myself -- with USAA. You use the Amex payment network, but you have nothing to do with American Express's bank (meaning you don't deal with their customer service or underwriting).

Until I got my Amex Amex, I was using my USAA Amex at Costco. Works just as well.

Anonymous said...

I missed that whole Rumor part in the title, my bad.

Credit Matters said...

Anon, no worries, pal.

Bob Wang said...

I always have to hit the Post Comment button twice.
The first time I get this error message:

Credit Matters said...

Thanks, Bob. I get that error from time to time as well. I just hit the "post comment" button again and it works.

clutchcargo said...

That might just give me a chance to post before Bob, assuming I have faster internet.

Anyway, a friend that I alerted to this checked his and his girlfriends AMEX and she received a credit line increase. I believe they are costco branded cards though.

Credit Matters said...

Glad to see someone getting a CLI at Amex, Clutch. It's the Costco True Earnings Amex card, Clutch. Nice.

Jim in the City of New York said...

I think American Express should revert back to the charge card only model. Let other financial institutions issue American Express network credit cards (and take full advantage of the key gains made from antitrust rulings and agreements made with financial institutions/payment networks).

Hopefully, they'll create an in-house, no annual fee version of their charge card. One for people who are reasonably good customers, but refuse to pay an annual fee for a basic charging privileges and limited selection of enhanced benefits (maybe comparable to the ones offered under Blue, for example).

American Express' stunt of offering many new credit products and allow people with less than stellar credit did their job. It rejuvenated their cardmember base. But, as is typical of actions made in the best of times, they never took into account about the possible negative side effects until it is too late.

It doesn't take a genius to realize that giving high initial credit limits (and giving liberal CLIs) will be abused by many. It doesn't take a genius to understand that those with questionable credit in general have a higher chance of defaulting. It doesn't take a genius to realize that certain risk analysis models will make you think that the sky is falling and the world is imploding too.

American Express brought it to themselves.

While I don't have too much sympathy for those with questionable credit facing the ax with Amex. However, I do sympathize for good customers with great credit and good financials, who after years of loyal usage gets unceremoniously shut down by Amex.

I wonder when I'll be next. I'd think a undergrad like me with a $6.6k limit would be a big risk to them. Never mind if I pay in full, on time, every time and I never spend more than I can handle. It'd be a devastating blow to my purchasing power, but I'm ready.

Credit Matters said...

I remember a few years ago when people in the high 500s and low 600s were being approved for American Express cards. I remember thinking that American Express sure had changed. Back in the day, if you didn't have stellar credit, you didn't even bother applying. In 2006, though, lots of bad credit risks were welcomed into the fold.

Jim, just make sure you have diversified. Have back ups to your American Express card(s). Those with no back ups are in the worst predicament. They are at the mercy of American Express.

Jim in the City of New York said...

Usually, I like to charge purchases (at reasonably respectable merchants/restaurants) over $10 to American Express. If not that threshold, any purchases that I might possibly need to take advantage of benefits offered by Amex.

I do have backup cards, but they don't exactly inspire much confidence.

I'm holding a Washington Mutual card that's just a couple of hundred dollars shy of the Amex CL. But, a few months ago, I received a changes in terms, conditions and benefits slip. It seems like WaMu dropped certain Platinum card benefits (e.g.: extended warranty, etc.) and I have had issues with their customer service.

To make matters worse, this Chase takeover makes me quite nervous.

Then, I have a Merrill+ card. I think I have the lowest limit compared to everyone in CB that has this card. I can never get a CLI with these guys.

Otherwise, good customer service and good fine-print benefits. But, I can't charge even a decent laptop or a coach seat trans-Pacific airplane ticket on this card without going way over the limit.


Credit Matters said...

Jim, when was the last time you checked on a CLI at Merrill? Recently, my friends have had a success with CLIs.

Jim in the City of New York said...

This July (6 months mark). But, they've asked me for my financial details again. Apparantly, they "lost" the financial information that they had on file for me.

When I applied for the card, I was employed part-time (although the bulk of my spending money comes from scholarships, stipends, etc. rather than the employment per se).

At July, I wasn't employed and I had nothing to provide them, so I dropped the request.

It sticks at $1000. And I never charge more than $100 on that card, that is, if I use them at all.

Credit Matters said...

So when you hit the CLI button on Merrill's (FIA's) site, you get a phone call from an analyst asking for updated financials?

Credit Matters said...

Also, do you have a job right now? Or are you a full-time student?

Jim in the City of New York said...

I'm a full time college student and at the moment, I do not have a "traditional" paying job (although I work at a high school every week for a generous increase in my stipend provided by my college).

I don't get a phone call from an analyst. When I click on the CLI button, a form pops up asking me to enter my financial details.

Credit Matters said...

Ahh. I see. Because you don't have an income, you can't fill out the form.

As soon as you do have income, I would advise you fill it out.

Jim in the City of New York said...

Will do!

Credit Matters said...


Anonymous said...

Please explain why CC companies should NOT be reviewing their portfolios AND requesting proof of income. I think it is common knowledge FICO is not based on income but on CLs, utilization and timely pmts. I sure as hell would want to know if someone who had access to $6.6K of my assets he/she was employed. AMEX has been around a long time and knows their blue sky cache. I feel worse for the AMEX employees who lost their jobs. If anyone thinks the FICO system is going to sail through this bailout scot free....I got a bridge to nowhere that I hear is for sale. Verifiable HH income will and SHOULD be a factor in a credit sore. AMEX is doing its job for its shareholders. Given the economic predictions for the holidays and well into '09 all CC companies should be cleaning house. It would be a breath of fresh air to see all the "alleged" CC CLs reported by CB members disappear. Most of them are liar lines anyway.

Credit Matters said...

On Sept 12, 2008, I wrote a story with this title: "American Express's Financial Review System is Flawed, But I Respect Its Right To Request A Financial Snapshot From Time to Time."

Clearly I agree with you. I see no reason why Amex should not review portfolios and request proof of income.

Credit Matters said...

Just thinking about it. At least American Express isn't slicing and dicing with their infamous financial review. No 4506-T forms to fill out. Right?

Silver lining and all that.

Jim in the City of New York said...

It still looks like people subject to F/R have to go through either 4506-T or the more traditional method of sending in copies of previous tax returns directly.

Anonymous said...

Just heard that Amex is cutting limits as they have no money left to lend or run the company going forward. I think people should sell their stock as they will be done soon. Amex always depended on the card charges and spending . People are dumping Amex cards. I just dumped $20K worth of their stock,safeguard yourself. Their management has no direction and that's why they are punishing good customers.

Anonymous said...

Amex getting out of credit card business.I have been told by their rep that they are just trying to survive and it is getting difficult. So move your investments away from Amex. Use other credit cards and pay them on time. American Express is done.Dump their stock. said...

Thanks, Anon. Could you imagine a customer service rep being reputable? Ha!

My readers are savvy. They'll take your post what it's worth.

Be well.

dondi said...

Amex just canceled my Platinum card with no notice???
I went to use it and it was declined.
I called the next day and they said they checked my credit score and that was why. I checked my credit score and it is just about excellant. I over pay my amex each month and have a balance on the card and they canceled it
What rights do I have? What can i do about it?
All my payments are billed to the card.
HELP said...

Dondi, first thing. They can cancel it. You have no rights in that regard.

Next thing: make sure that you change any account that automatically bills to your Amex card. They will likely be declined.

American Express is a piece of work.

Anonymous said...

Great Blog!
I had a $ 10 K limit Blue card with no balance (it was an emergency card). Amex sent me a letter with the great news that it was slashing my line to $ 1.5 K. I called them to get an explanation and the rep only told me that he could do nothing about it. I told him to cancel the card. Our TARP funds hard at work. said...

Thanks, Anon. Glad you like the blog. Standard operating procedure for Amex. Our taxpayer dollars are working wonders. Of course, Amex got a jump on this. They were already doing this stuff long before it received TARP funds.

American Express: trailblazer.

Anonymous said...

Any lending card is always a risk. The longer you carry a balance, the more likely you are to default and not pay off the account. If you have a credit card that you haven't used, and now all of a sudden start charging, you look like a risk. Especially in this economy. After reading these blogs it's not surprising how bad everything in our country has become. So many people depend on borrowing to live well above their means.

Anonymous said...

Dear Ms. Teegardin,

I read your December article on how Mr. Johnson was treated by American Express with a personal interest. I had been the recipient of the same scenario. In October, or there about, we got a letter from American Express that my previously very high limit was being reduced to around $1200. We have had this account since around 1998 and used it for all our monthly purchases. We bought gas, groceries, medicines, etc on the card we had purchased through Costco in Kennesaw, GA. The reason we got it was due to a 2% bonus on purchases and every year we enjoyed a couple of hundred dollars in returns on that card.
When we got the 'letter' we were shocked. We always paid on time, never carrying over a balance. The monthly amounts were always around $1500 to $2000 as that was our budget and let me tell you, my wife, Dawn, always follows her plan. Well, why did this occur? Then we had an epiphany. Was it BECAUSE we always paid the account? Maybe they wanted to get the interest we never paid. Well, it was a thought and worth a question to American Express. So I called and spoke to an agent of American Express and we discussed how the account was valuable to me at the amount I had but not at this new level. The agent I spoke to was at first very nice and put me on hold to check out the account. After a few minutes after placing me on hold, he changed 180 degrees and suggested if I couldn't use the account at the level as adjusted, then I should just close the account. There was nothing that American Express could do about the ‘adjustment’. We broke our communication at that point and I thought long and hard about the turn of events.
After discussion with my wife and allowing a couple of days of cool down time I called back again and asked for management instead of just a phone customer service agent. This person was even less helpful than the first, basically being pretty aggressive and telling us we had no recourse. When I told her after all the years I would have to close the account if after ten years of paying early but ALWAYS on-time this was the ‘new’ American Express. Their comment was something like “I think that would be best”.
My wife and I just thought that they were cutting those who never carried balances and owed those ridiculous interest rates. What really happened and what transpired over the next several months indicates to me a more sinister picture right up there with the rest of Wall Street.
As you know, American Express received $3.389 Billion in bailout on January 9th. In my most humble opinion this just proved my theory of their ‘cutting their losses’. But let’s look at what else they’re receiving.
In December or January I contacted the American Express Customer Service office and talked to a very helpful agent this time. I had a credit I needed returned and I asked when and how I would get my rebate owed on my Costco. He told me a closed account wouldn’t get that rebate and since that new fact wasn’t disclosed he would re-open the account and I’d receive $201 in February. February came and went so I contacted them again. Wow, what a change this time. I was told the account was not reopened. A fact I was never informed of and one that without a letter of notification is in noncompliance with federal fair credit laws. I was told the rebate was considered a ‘reward’ that if I saw it as earned at the point of each purchase, they considered it to be a reward earned at their convenience and discretion. That they did not have to disclose their policy of not paying it at the time of the credit limit reduction. That they closed my account, I guess before I had made that second call, though how this occurred and how I was never informed of this is beyond me. That the matter was closed.
I have since sent to their Home Office a Ten-day letter of demand and decided to contact you, too. My fellow hard working American Taxpayers having to bailout these people and then endure further money looses earned but kept by them such as this need to be made known. I hope you print this, look into these companies in more detail and show us, the American Taxpayer that it doesn’t just affect Wall Street. They are taking from us on Main Street as well.

I am most respectfully yours,

Joseph Davis
236 Park Forrest Way
Kennesaw, GA 30144

Bailout recipients:
Jan. 9 American ExpressAmerican Express Specialty lender New York $3,389(million)

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