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