New threat to your credit limit -- other shoppers
Posted
Jan 29 2009, 12:32 PM
by
Karen Datko
Rating:
We've read that some credit card companies may ding those who use their card in bars or tire-retreading shops, or live in an area with lots of foreclosures, but this takes the cake: If you're an American Express cardholder, your credit limit could be reduced if other customers who shop where you do have fallen behind on their Amex bills.
Is this yet another way credit card companies are penalizing responsible customers because their own bottom lines are hurting?
In a post called "Be careful where you shop on credit" at the Suddenly Frugal Blog, "leangreenmom" said, "Yes, you read that right. This has nothing to do with customers not paying their bills on time. But it has everything to do with customers shopping in stores where other people who have been delinquent about paying their credit card bills also happen to shop."
Kevin D. Johnson of Atlanta, whose new blog, NewCreditRules.com, tracks changes in the credit card industry, became an activist after he got a letter from Amex announcing that his credit limit had been slashed from $10,800 to $3,800. One of the reasons, the letter said, is: "Other customers who have used their card at establishments where you recently shopped have a poor repayment history with American Express."
Kevin, who, by all accounts, was a model customer, wrote in a recent post, "The implications of such a statement are alarming." One implication: A reduction in your credit limit will lower your all-important credit score.
He asked Amex to identify the particular establishments but got no answer, so he listed all of the businesses where he has used his card since December 2006 and asked his readers what they thought. The list includes well-known restaurants, airlines, the U.S. Postal Service and Wal-Mart.
Kevin, whose story was featured on "Good Morning America," told GMA he was particularly appalled because Amex received $3.4 billion in taxpayer-funded TARP money. "Here you have a company that's obviously in dire straits, but, in trying to turn the company around, they actually throw some of their best customers under the bus," he said.
Another unhappy Amex customer shared his story with MSNBC. The letter he got mentioned the "where you shop" justification and also: "Our analysis of the credit risk associated with customers who have residential loans from the creditor(s) indicated in your credit report."
So not only will they ding you for where you shop, but also if other people who used your mortgage lender aren't up to speed on their payments.
An Amex spokeswoman wouldn't say which stores raise flags and added that the list is constantly changing. She told MSNBC that looking at where you shop and who your mortgage lender is are part of "a holistic look at someone's overall credit profile."
Related reading:
New Citi rates: Should you opt out?
Your lifestyle may hurt credit score
Credit card cutbacks hit consumers hard
How to win the credit-score game
