AMEX Raising my APR AGAIN

[MattH]

Well, evidently the gouging ealier this year was not sufficient, because I just got a letter from AMEX that as of October 2009 my APR on the Flexible Payment feature of my Gold Card will be prime plus 11.99% which as of August 1 would equate to 15.24%!  I have had an AMEX card since 1982 with an excellent payment history, and have given them a LOT of transaction activity over the years.  This has no practical impact on me since I don't pay credit card interest, but I still find this rather offensive given my history.  If my AMEX were not my oldest tradeline, I'd seriously consider dropping it but I want to keep its history on my credit reports.  Not only does the age help my FICO scores, but a clueful human reviewing my credit would realize that in 1982 it was much harder to get an AMEX card than it is nowadays, so having an AMEX account from that era is a credential I value.  But I am beginning to wonder how much they value their long-term customers!

With my FICO scores ranging from the upper 700s to low 800s, do they actually think I will ever pay interest at such an outrageous APR?  The only interest I pay at present is the mortgage, but if I ever I needed to carry a CC balance I'd put that on my Chase card where my purchase APR is still 5.25%.

[Watchmann]

Your long history with AMEX is lost on them as to how difficult it was to obtain a Gold Card in that era.  I have slightly longer time with them with the Gold Card (1980) than you have.  Back then getting an AMEX Gold Card was not easy; their application form said only the top 5% of credit worthy customers were eligible for the Gold Card.  Over the last few years Gold and Platinum cards were given away to almost anyone who could pony up the AF.

I would have to believe there are many 800-ish FICO score cardholders that pay interest.  Having a high FICO score does not mean you are debt free.  That is a flaw with FICO, it doesn't take into account your income.  To me that is a real hole in the whole FICO concept.  If a student with little income can have a high score what does it really mean as to their ability to repay?

There was an ariticle in the WSJ the other day saying AMEX was trying to reconnect with their well heeled customers who have essentially shut their wallets in the last year.  We shall see what they have in mind.

[haulingthescoreup]

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Watchmann wrote:

...Having a high FICO score does not mean you are debt free.  That is a flaw with FICO, it doesn't take into account your income.  To me that is a real hole in the whole FICO concept.  If a student with little income can have a high score what does it really mean as to their ability to repay?

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FICO scores don't try to measure your ability to repay. They try to predict your risk of not repaying.

It is the lender's job to determine ability to repay, by evaluating your income, job stability, and so forth. FICO scores, properly used, are only one facet of gauging credit-worthiness.

MattH, oh well, sorry to hear about the APR increase, not that it matters in your case. I suppose they're just making entries in their books or something.

[Watchmann]

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@haulingthescoreup wrote:
FICO scores don't try to measure your ability to repay. They try to predict your risk of not repaying.

It is the lender's job to determine ability to repay, by evaluating your income, job stability, and so forth. FICO scores, properly used, are only one facet of gauging credit-worthiness.

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This is exactly right.  But the whole foundation of the 'risk of not repaying' of the FICO model has shown to be severely flawed.  For years the mantra in the mortgage industry was 'people will move heaven and earth to pay their mortgages.....they will not default'.  Well, that has been shown to be a defective argument.  People will indeed walk away from the mortgages.  So a high FICO is of lesser value now in determining this willingness to repay.

Agree that it is the lenders job to determine the ability to repay, but that was corrupted during the go-go years.  "High FICO score = great prospect for easy credit" has shown to be a bad business model.  IMO the FICO score supplanted good common sense in evaluating whether a person should get a loan or not.  Bad decision on the lending industry's part, but certainly aided and abetted by FICO themselves.  Plenty of blame to go around.

[Anonymous]

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@Watchmann wrote:

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@haulingthescoreup wrote:
FICO scores don't try to measure your ability to repay. They try to predict your risk of not repaying.

It is the lender's job to determine ability to repay, by evaluating your income, job stability, and so forth. FICO scores, properly used, are only one facet of gauging credit-worthiness.

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This is exactly right.  But the whole foundation of the 'risk of not repaying' of the FICO model has shown to be severely flawed.  For years the mantra in the mortgage industry was 'people will move heaven and earth to pay their mortgages.....they will not default'.  Well, that has been shown to be a defective argument.  People will indeed walk away from the mortgages.  So a high FICO is of lesser value now in determining this willingness to repay.

Agree that it is the lenders job to determine the ability to repay, but that was corrupted during the go-go years.  "High FICO score = great prospect for easy credit" has shown to be a bad business model.  IMO the FICO score supplanted good common sense in evaluating whether a person should get a loan or not.  Bad decision on the lending industry's part, but certainly aided and abetted by FICO themselves.  Plenty of blame to go around.

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The probelm is that during the 90s and early 2000s, the FICO scoring model was used in lieu of real underwriting standards. The FICO score is a good bellweather of a person's risk when times are good, but when things go south, it appears to be of less value. A person can have a score of 800, but if they lose their job and had a high DTI ratio to begin with, then they are a poor risk. CC issuers and other lenders did not do their due dilligence in verifying income, debt, etc. Issuers like Penfed, which had REAL underwriting standards and didn't rely solely on FICO scores, are weathering the crisis very well. This should be a lesson to all CC issuers: blind use of FICO scores rather than looking at a person's ability to pay debt will be a death sentence when times are tough.

Message Edited by Wesley23 on 08-09-2009 05:44 AM

[Anonymous]

I got the same letter from Amex and I always pay the gold card in full and I use it for everything due to the rewards/points they give me. I charge anywhere from 1500-3000 per month on that card and I have for years! I buy groceries, gas, incidentals and even pay a few of my bills through it (like cell phone) but I still got that dang letter. They really reamed my husband's cl's but so far have left mine alone on my blue card (5000.00 and 0 balance) and my clear card (15300.00 limit and 3800.00 bal which I am carrying because I have 2.99 for life so I did a bal transfer a while back) I am not sure why they lowered my husband's cl's since his fico is 40 points higher than mine is.

Does anyone know why cc companies do what they do? Can you explain it to me? My husband's cc's have taken a beating big time from almost all of this issuers, particularly Chase! I don't get it. I have only received a few notices of apr increase but no cl reductions at all. What gives? Please tell us what we can do to stop the carnage on my poor husbands accounts. His score is gonna take a huge hit as he looks like he has much higher util now.

Also, why does Citibank not report cl's to the cr agencies? I have a card with a 27000 cl that is unreported (only high bal is reported) Can someone tell me the answer to this? Thanks again.

[smallfry]

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@Anonymous wrote:

I got the same letter from Amex and I always pay the gold card in full and I use it for everything due to the rewards/points they give me. I charge anywhere from 1500-3000 per month on that card and I have for years! I buy groceries, gas, incidentals and even pay a few of my bills through it (like cell phone) but I still got that dang letter. They really reamed my husband's cl's but so far have left mine alone on my blue card (5000.00 and 0 balance) and my clear card (15300.00 limit and 3800.00 bal which I am carrying because I have 2.99 for life so I did a bal transfer a while back) I am not sure why they lowered my husband's cl's since his fico is 40 points higher than mine is.

Does anyone know why cc companies do what they do? Can you explain it to me? My husband's cc's have taken a beating big time from almost all of this issuers, particularly Chase! I don't get it. I have only received a few notices of apr increase but no cl reductions at all. What gives? Please tell us what we can do to stop the carnage on my poor husbands accounts. His score is gonna take a huge hit as he looks like he has much higher util now.

Also, why does Citibank not report cl's to the cr agencies? I have a card with a 27000 cl that is unreported (only high bal is reported) Can someone tell me the answer to this? Thanks again.

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Your Citi card is the Premier Pass?

[Anonymous]

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MattH wrote:

in 1982 it was much harder to get an AMEX card than it is nowadays,

It seems that AMEX is returning, at least in sorts, to those days of more conservative approval. 

I ever I needed to carry a CC balance I'd put that on my Chase card where my purchase APR is still 5.25%.

If you ever get hiked on Chase and would like a similar APR, Addison Avenue Platinum Visa is 5.24%, no fees of any kind, 1% reward.

Sorry to hear about such a prime customer getting such non-prime rates.

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[creditwherecreditisdue]

A rate is only a rate when you carry a balance and it sticks. Until then it is either meaningless or window dressing.

[Anonymous]

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@creditwherecreditisdue wrote:
A rate is only a rate when you carry a balance and it sticks. Until then it is either meaningless or window dressing.

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True.  But if you do not have an account with a good rate, then you have no option to carry a balance except one that is detrimental.

While I think that carrying a balance under normal circumstances is ill advised, I do know that there are circumstances in which unexpected expenses may occur that may put some people in a position of not being able to pay the balance in full within 30 days.  Possibly needing 3 to 12 months.  In those cases, a good APR is essential.

Therefore, I like having my PIF cards, but I also like having my "could carry a balance" should I choose to without being subject to prohibitive rates.

And if you have the credit and option of a card with or without a good rate, then why not have one with?  5.24% is lower than many people's mortgage.  It is very common for people to "roll" debt including CC's into mortgage refinance in order to get a more manageable cash flow and payment schedule.

Refinancing a mortgage has inherent costs, such as doc fees, appraisal fees, loan origination or broker fees, closing fees, etc.  These costs make the refi of unsecured debt more expensive than the APR alone.

Thus, a 5.24% rate CC can be a good option for carrying a balance when such a choice is a responsible, well planned financial decision.

Just my "brief" take