Looks Like AMEX Is Up to More Tricks!

[Anonymous]

Click to read from "Smart Money", a magazine I subscribe to.

http://www.smartmoney.com/consumer/index.cfm?story=20080226-credit-card-companies&cid=1012

[WhirledPeasPlease]

Holy cow!  Great article, but very scary for me personally.  My ARM is surely seen as sub-prime.  I'm holding off on the refi to see if it sells first, but sheesh -- this makes me think differently about the situation.  Yet another reason to PIF to show that while my rate adjusted, I'm not in trouble!

[haulingthescoreup]

From the link:

In a recent presentation before investors, American Express CEO Kenneth Chenault said the company is "implementing targeted line reductions for specific segments of our portfolio representing the greatest risk," including card members "holding subprime mortgages and small businesses operating in specific industries, such as mortgage companies, home builders and construction-related businesses." Furthermore, he noted that the company is "adjusting credit models to reflect the higher probability of default that exists during a weaker economy, and in geographies that have been most impacted by home price declines."

So maybe there's a method in their madness after all.

("Targeted line reductions" is the euphemism for the practice of continually dropping CL's to a few hundred dollars above the current balance, even as the cardholder is paying down the total amount owed.)

[Anonymous]

It's ridiculous, really.  Do they actually pay people to sit around and think of these things? 

 "Ok, board members!  Let's vote on another way to screw our customers!"

[haulingthescoreup]

They should never have gotten into the credit card (as opposed to charge card) business. They're obviously not comfortable with the idea of carrying a balance, and then they went and made it worse by offering the credit cards that you can get with scores in the 600's.

In my opinion, they've done a lot of damage to their reputation, one which they earned over the years. It will be interesting to see how they deal with this mess, most of which is of their own making. My guess is that they'll sell off their credit card lines to someone else, or maybe start an entirely separate division.

What a mess.

[Anonymous]

Ahh - I now have a term to discribe this practice-

Chasing balances - has been added to my terms-

This is and raising APR's are the ways to force an account closure and reduce risk-

[FretlessMayhem]

How would they be able to tell a prime from subprime mortgage on a credit report? I don't think that's possible.

[tonsers]

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haulingthescoreup wrote: They should never have gotten into the credit card (as opposed to charge card) business. They're obviously not comfortable with the idea of carrying a balance, and then they went and made it worse by offering the credit cards that you can get with scores in the 600's. In my opinion, they've done a lot of damage to their reputation, one which they earned over the years. It will be interesting to see how they deal with this mess, most of which is of their own making. My guess is that they'll sell off their credit card lines to someone else, or maybe start an entirely separate division. What a mess.

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hauling - can you explain the difference between a credit card and a charge card? Thanks!

[Anonymous]

Charge card- Net terms- must be PIF every month

Credit card- Revolving terms- have the option of revolving part of the balance for a fee.

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tonsers wrote:

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haulingthescoreup wrote: They should never have gotten into the credit card (as opposed to charge card) business. They're obviously not comfortable with the idea of carrying a balance, and then they went and made it worse by offering the credit cards that you can get with scores in the 600's. In my opinion, they've done a lot of damage to their reputation, one which they earned over the years. It will be interesting to see how they deal with this mess, most of which is of their own making. My guess is that they'll sell off their credit card lines to someone else, or maybe start an entirely separate division. What a mess.

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hauling - can you explain the difference between a credit card and a charge card? Thanks!

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[Anonymous]

tonsers wrote:

hauling - can you explain the difference between a credit card and a charge card? Thanks!

I'm not hauling, but....

A charge card must be paid in full every statement cycle.  A credit card allows you to carry a balance from one month to the next and only requires a minimum payment each month.

Traditionally, Amex cards were all charge cards.  This was the only credit product they offered for many decades.  They only relatively recently started offering credit cards, and some their actions indicate they may have recently gotten a little gunshy in that area.