I have an American Express One card that I used to love. The two main reasons are:
- 1% of what I spend goes into a high-yield savings account
- No credit limit
It’s widely known that we’re in a credit crunch, and my old friend is not spared from the crunching.
- The high-yield savings account, which at its peak was 5.25%, is now only 2.75%.
- My credit limit has gone from none to…some.
My once stellar (to me, anyway) savings account is now terrestrial. My once unlimited resource (Vegas, anyone?) is now tethered.
An article in the Washington Post mentions how a sudden credit limit drop can affect your credit score. Using their example: If you start with a limit of $10,000 and revolve $4000, you’re utilizing 40% of credit available. However if the issuer lowers your credit to $5000, your suddenly utilizing 80%. So when your credit score is calculated, you look as if you’re nearing your maximum. And that counts against you.
The Good
I was told (by American Express themselves) that having a card with no limit can damage my credit report. It seems that when calculating the score, if the scorer encounters a card with no limit, it considers the balance as the maximum available. Say I have a $3000 balance on a no-limit card. The credit-scorer wants to figure out my debt-to-available-credit ratio, but it can’t—there is no pre-determined limit. So it uses my balance, $3000, as the credit limit. This makes it looks like I’m maxed out on that card, but in reality I can’t max out.
So, with my newly established credit limit, I no longer look maxed out.
The Bad
By establishing a credit limit, Amex has formed an opinion about me: This guy can go off the handle at any moment. It’s an exaggeration, but it still hurts. I thought Amex and I had something.
The Ugly
But others with the One card have had it worse. One One card holder had his balance reduced to $5000, but he was revolving $6000. Then Amex requested he immediately pay it off in full.
My friend the One card has gone from telling me it’s OK to push my limits to being the voice of reason. Instead of, “You need a new laptop”, I’m hearing “You don’t really need that DVD.” That’s a good thing…after all, Vegas is almost paid for.
I just had my credit limit slashed more in half by AmEX - I found out at a store when I attempted to use the card that they had cut my limit to $50 more than my balance. This had gone into effect only 4 days before, and I had not yet received any letters from them about this.
Isn’t AmEX now a bank? Don’t BANKS have restrictions on lead time and notifications BEFORE cutting the limit? AmEx admitted I had been an excellent customer - never late, never over limit, payments more than 10x the minimum!! Not only is this hurting my budget and FICO score, but in the long run, our entire economy will slow as everyone’s FICO scores drop and credit dries up again while the money lenders improve their compensation and profits.
Sadly, our own government is behind this!! The federal government is pressuring banks to boost their capital reserves, which must be held against credit card lines whether they are in use or not. The less credit banks offer entrepreneurs like you and me, the less capital they need to meet their reserving requirements. So — we loan the banks our tax dollars so they can meet these requirements with our left hand, while having our ability to restore the economy cut by these same banks leaving our right hand also empty.
Add higher taxes (AZ is “temporarily” increasing their state sales tax), much higher inflation (toilet paper is over a dollar a roll! ), fewer jobs and we will have completely destroyed the average middle class family within 10 years or less. Those who are already on the lower end of the economic scale will slide into poverty where there are fewer and fewer resources because no one can afford to fund the charities or governmental programs that now help them.
I am on complete disability and the insurance payments from my employer’s disability plan are 100% taxable, even if you were hurt on the job! This added “income” now makes my pitiful Social Security Disability payment taxable too. As we add gasoline taxes, sin taxes, sales tax, and property taxes, etc. to fund ever growing governmental entities to manage these new programs, the tent cities housing the growing number of homeless FAMILIES which are popping up in every warm area of the country, are being dismantled by the very government that lent these banks and credit companies *our money*.
If class action suit by people like me that were hurt by cut limits without proper notification will put even a tiny dent in the march to fully enslave the average American, then I am all for it. Make sure my name is first on that list!
Comment by Melissa Gemmel — July 1, 2009 @ 9:52 pm
I just looked at the “Consumer Credit Protection Act” under the FDIC, also know as the “Truth in Lending Act.” Look at the following:
§ 104. Exempted transactions
This title does not apply to the following:
(1) Credit transactions involving extensions of credit primarily for business, commercial, or agricultural purposes, or to government or governmental agencies or instrumentalities, or to organizations.
(2) Transactions in securities or commodities accounts by a broker-dealer registered with the Securities and Exchange Commission.
(3) Credit transactions, other than those in which a security interest is or will be acquired in real property, or in personal property used or expected to be used as the principal dwelling of the consumer and other than private education loans (as that term is defined in section 140(a)), in which the total amount financed exceeds $25,000.
This states that both MOST commercial and consumer credit loans are NOT protected under this law!! Thank you our Congress since 1968!
Comment by Melissa Gemmel — July 2, 2009 @ 12:27 am