American Express, Chase Cut Card Limits, Lowering Credit Scores

[Purveyor]

March 3 (Bloomberg) -- Wayne Brown has a dilemma. If he reduces his credit-card balance, American Express Co. will cut his credit limit to the amount of the new balance, he said. If he doesn’t make a big payment, his interest rate may skyrocket.

The credit limits on Brown’s cards have been lowered, which has raised his debt relative to his available credit. This so- called utilization rate is a key factor in determining credit scores. Brown, a 58-year-old construction company owner in San Diego, has seen his credit score drop to 650 from 760 over the past 13 months.

“Interest rates on all of my cards are going up now and my minimum payments are almost doubling because it looks like I’ve maxed out my cards,” said Brown, who uses credit cards to fund his home-building company. “It’s a Catch-22.”

About 45 percent of U.S. banks reduced credit limits for new or existing credit-card customers in the fourth quarter of 2008, according to a Federal Reserve January survey of senior loan officers. Financial institutions may slash $2 trillion in credit- card lines in the next 18 months, Meredith Whitney, a former Oppenheimer & Co. analyst, wrote in a Nov. 30 report.

“You’re no longer immune if you have good credit,” said Curtis Arnold, the founder of CardRatings.com, a Web site that reviews credit cards. “The issuers hold the cards, literally.”

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BLOOMBERG: http://www.bloomberg.com/apps/news?pid=20601087&sid=adCwmmkzFI3U&refer=home

[WI_DEM]

1. I hate credit card companies. I almost wish some of them would go under, but

I guess it would hurt the consumers too.

[SmileyRose]

2. When this is over, I hope small business remember what AMX did to them.

We will all remember who stood by us, treated us with respect, and who screwed us sideways.

Our business worked with Wachovia, Citi, AMX and Bank of America regarding various corporate credit products. Oddly enough, BOA is the only one that shot straight with us. They have even stepped in when the others got out of hand. This businesses credit rating was top tier and still is. In spite of the drop in business we have been able to reorganize and remain profitable at a lower margin.

AMX is hurting small business so bad it's unbelievable. If they end up relegated to the history books when this is all over then I would not shed a single tear.

[zipplewrath]

5. I won't be surprised

Amex has always been about service to the card holder, not the service provider. That alone made them unpopular with businesses, especially small ones who could not negotiate any bulk discounts. But when they dabled in "business credit" they were trying to work both sides of the market. The continually go through various cycles because they can't keep enough small merchants in their system. This isn't going to help. They only thing they have going for them is that small businesses come and go so quickly that in a few years, most won't remember what they did in these times.

[HillbillyBob]

3. We have let the credit card companies determine how we live

and 'who we are' by our credit limits.
I think it is time to pay off those cards, cut them up and mail them back with postage due.
We need to learn to live with in our cash means. We as a nation and as individuals have been living higher than we can afford to.
Our house hold has 2 cards one is for tractors supply house and one is a general card which we use sparingly, we only got those to boost our rating so we could buy a home, then we had to have a car as the old junk heap finally went to the junk heap for recycling..the transmission went and do you know how hard it is to get a Grand Caravan transmission for a 16 year old minivan? It could not be repaired one more time either.
The other vehicle is a pickup that is now 11 years old with 146,000 miles on it.
It gets limited use as it is hard on gas, only 20 mpg.
We want to get it all paid off then start on putting in solar / wind hybrid power and tell the electric company either be fair for the power we generate and feed back to the grid or cut the wires. I frankly would rather cut the wires..
Its mostly coal generated, when I spoke to them about it they were almost dismissive. Saying "We sell power at 11c a kwhr." They lie because we actually pay too with our taxes in subsidies, that shit needs to stop too. Hiding costs by subsidy is another credit that we pay for.

[zipplewrath]

4. Spread your debt

Looks like what the consumers need to do is to spread their debt around. Keep/get as many cards as they can, and spread whatever balances they have over them all so that each individual card has low balances, yet their total available credit is high. Plus, it keeps all the accounts active so they don't shut any one down for inactivity. Of course, as always, pay them down as much as possible as well.