Monday, October 6, 2008

Credit Card Weirdness

This did not happen to me.

I don't have an American Express credit card.

But a colleague of mine does. Her husband is a physician who flies all over the world setting up temporary emergency hospitals, particularly in third world countries.

They use their American Express card alot. They tend to charge several thousand a month, particularly in airline fees for which they are reimbursed.

They have never been late with a payment. They are nowhere near their credit limit.

Yet this past weekend, my colleague received a telephone call from American Express demanding an additional payment (she had just sent in a payment the prior week) or their card would be suspended.

When she objected and pointed out their excellent payment record, she was told that American Express was calling on many of their "good" customers to make additional payments.

My first thought was that this was a scam, but my colleague called American Express this morning, and verified that the weekend call was genuine, and so was the threat to suspend the card.

I'm just amazed that this could possibly be legal.

What is going on? Fall-out from the credit freeze? Credit card companies running scared?

All in all, it seems foolish of American Express to tick off their "good" customers. And my colleague is plenty ticked off!


Fabulously Broke said...

That's fucked up. I hate AMEX. I only use MC or Visa and now it's just MC

Shevy said...

I think you're exactly right. AMEX is famous for not having defined credit limits (they approve charges "based on your payment history and ability to pay" or some such if I remember their commercials correctly).

I'm going to guess that they're seeing an increase in people charging (much) more than usual and/or not paying their bills in full each month (not accecptable under the terms of the usual AMEX account, as they're not revolving accounts).

AMEX does offer a revolving account as well, but that's a relatively new thing in their history.

Anyway, if they're seeing this trend they're probably concerned that they're going to be stuck for huge amounts of money (bear in mind that some of their clients charge well into *6 figures* each month). If a lot of their big spenders suddenly didn't pay AMEX could conceivably go under.

But, is it a good plan to tick off your good customers? Emphatically, no! They're going to need all the goodwill they can get if things get really bad. But I think it's clear that they're running scared (and I think their position is worse than that of Visa and MasterCard because of the differences in the ways they operate).

Sharon said...

Okay, the scissors are now cutting my amex blue...I don't need that crap. Thanks for the heads up.

Anonymous said...

When you 'charge' something on a credit card, technically you really don't own what you have bought until you pay for it. AmEx usually wants their charges paid in full at the end of the month.
The debtor is slave to the lender. You have to do what they want because, as I stated, you really don't own the products or services you purchased. AmEx does.
Get used to this because it's only going to get worse. I'd hate to see your friends in Europe or Africa or whatever and unable to charge anything. Best advice is to get some cash together in an account that offers Visa/MC check cards (work like credit BUT is backed by cash) You can get airline tickets, whatever, with them.

DogAteMyFinances said...

Wow, that's a huge red flag. I pay off my cards twice a month when I get paid, but I know most take the month of "float." It's SCARY that Amex can't handle the float on a few thou.

This blew my mind.

Anonymous said...

This month I was late on my mortgage payment for the first time ever in 15 yrs. We had a death in the family (actually 3 in 7 mos. but this was the latest) and in the crisis, I forgot. My payment is due on the 20th of the month and I have a 10 day grace period. I mailed it in on the 29th of the month. Well, on Oct.1st, I get a call from my mortgage co. (JP Morgan Chase) demanding payment and threatenting to send me to collections. You can imagine my surprise. Never late, ever, in 15 yrs. except this one time. And the shocker of it was, I was ONE DAY PAST MY GRACE PERIOD when they made the dunning call, not a week, a month or 3 mos. past due, ONE DAY!!! I was amazed, I figured that banks are going to be very aggressive now about collecting debts, even with good customers....I was really shocked at their tone and persistence and wondered why this was and the company rep told me that this is how they are now doing business "because of market conditions". They did waive my late charges when I expressed regret for forgetting and explaining the circumstances but still...I was very surprised.

MorethanjustMom said...

Credit card debt and unsecured debt is callable debt.
Amex has the right at any time to ask for the whole balance back.
I have read that 50% of Amex holders who had their account reviewed had their limits lowered.
Even if your friend is charging the same or less than usual, her credit score may be taking a hint if she is charging more than 60% of her cc limit.
Not a pf or any sort of adviser here, just trying to dig myself out of cc debt. :)

Kemkem said...

The very same thing happened to me with American Express. I had a platinum business card with them and a revolving business card, and an optima card..never late, been a cardholder since 1982. I get a call about 5 months ago, saying my "sign and travel" was being suspended, and my business account limit was cut from 25,000 to 4100! At that point, my balance was 3900!, I was so mad, and had extra money at that particular time, sent the 3900, dropped my card to a gold card and got a refund (375 yearly fee vs 75 for gold), cancelled my sign and travel and got back the 45 dollar yearly fee also, they had the nerve to ask why? I said since they were watching my money for me, l decided to take it one step further. Now, l rarely use the gold card and prefer to use my debit card and BofA card as l dig myself out of debt. I know they have problems, but even after this whole mess is forgotten, l won't forgive them. 2 days ago, l get an email from them saying the 4100 was being lowered to 1000! and l haven't even used the card since l paid off the balance...guess they're scare l might!

Anonymous said...

weird. my credit limit with Amex just went up. never had a problem.

HS @ Our Debt Blog said...

AMEX would do that?? I've been an AMEX customer for years and I've never experienced anything like that... of course my balance is always O!

Lisette said...

I think you are going to see a lot more of this with all the credit card companies. I've heard some are reducing people's credit limits even if they've been good customers. They're canceling people's cards that they have had for years just because they haven't used it in 6 months. Also they are increasing interest rates. My JC Penney went up to 23.99%. I use this card occassionally, usually when I have one of those $10 off $10 coupon, and pay off the small amount when I get the bill.
If they keep tightening up the credit, it's only going to make things worse.