topic Re: Credit Cards that are closing accounts or decreasing limits for no reason in Credit Cards

Credit Cards that are closing accounts or decreasing limits for no reason

user979797 — Sat, 18 Apr 2020 22:29:05 GMT

These last few weeks I have sadly seen a few posts about banks closing or decreasing credit limits during our time of need in a true crisis. I would hope that all banks and credit unions could and would stand with it's customers at a time of crisis and emergency. Some are doing this and some aren't.

I have also seen a few posts of customers noticing which credit cards are getting slashed or cancelled for no reason and which aren't (at least so far) and this really struck a chord with me. I personally will be watching to see which ones help or hurt customers during a crisis. I call cancelling a customers credit card or even reduing their limit when they have been a loyal interest paying card swipe fee getting customer NOT RIGHT. It's even worse when the customer has to find out by logging into online banking. Not so much as a phone call to talk about it or see if that is downright going to hurt the customer during a pandemic? In my opinoin this is NOT RIGHT.

I know some will agree and some will disagree. That is OK we are all in this together no matter what we think I just had to post this because it pesonally makes me annoyed to see "big bullies" on the playground during a crisis taking actions that can hurt a persons financial health even more by taking away credit lines that we prove responsible enough to obtain to begin with.

I just feel any customer who has always paid on time and never exceeded their credit limit and has always shown good faith in the past should not be punished during a crisis for whatever reason. I personally will remember what banks did this and in the future I will not be banking in any form with these institutions.

Thanks to all of you who are posting your experiences and please keep posting on the boards about these banks and credit unions that take these actions.

Sorry to all of you who have experienced a credit limit decrease or a closed credit card account during this time of uncertainty. Hang in there

Re: Credit Cards that are closing accounts or decreasing limits for no reason

CreditCrusader — Sat, 18 Apr 2020 22:42:39 GMT

You know, I came into this issue breathing fire on Synchrony for their persistent poor treatment of card holders. After all, they purge accounts about every other year with ZERO notice to their customers.

But I have to tell you, I'm beginning to think that this is almost an expected thing among many credit card issuers...and in particular, store credit card backers are the chief offenders.

Comenity has a history of screwing around with both limits and accounts. GE Money/Capital also used to do it before they handed the reins to Synchrony.

Regarding non-store cards, AMEX is legendary relative to messing with accounts and limits subsequent to pop FRs. Discover is consistently inconsistent. Trying to get a read on how both of those cards do business is like trying to get cats to march in a parade.

In my opinion subsequent to three decades in the credit game, sticking to strong credit union cards and those offered by banks with whom you have an established savings/checking/mortgage relationship built is the best way to avoid this sort of headache. True, it's tough to get the $20,000-$50,000 limits that some have bragged about relative to store cards, but what good are those limits if the issuers simply yank the rug out on a moment's notice? Using those cards to keep UTIL lower is all well and good...until the limits no longer perform their task and your credit score shoots up like a rocket. Better to just shoot for the highest limits possible with more stable cards as a long run strategy.

Just one man's opinion, not for everyone...

Re: Credit Cards that are closing accounts or decreasing limits for no reason

sarge12 — Sat, 18 Apr 2020 23:35:10 GMT

It is best to keep in mind that during this virus, financial institutions are getting nervous. They and their customers are all unsure how all this will play out. Seeing all these buisinesses shut downleads them to fear a massive number of defaults. That is especially true for some of these lower tier card issuers, who have a huge percentage of their customers with lower credit scores. During such times they look to lower their exposure, especially to those most likely to default. credit cards are not a right guaranteed by the Constitution. It often has nothing to do with the person whose card is closed, just the strength of the economy and seeing so many becoming unemployed. I am sure they have actuarial charts that show how higher unemployment leads to higher defaults, and can actually predict the number of defaults that will happen. I am 61 years old, and I have never seen all these businesses closing for any reason for an extended length of time. That creates great uncertanty, and financial markets hate uncertanty. They do not know if or when the restrictions will be lifted, nor do they know if an attempted ramping back up of business might lead to the flattened curve going up again. Like almost every business, great uncertanty makes cash king, and they start liquifying assets.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

CreditCrusader — Sat, 18 Apr 2020 23:42:19 GMT

@sarge12 wrote:
It is best to keep in mind that during this virus, financial institutions are getting nervous. They and their customers are all unsure how all this will play out. Seeing all these buisinesses shut downleads them to fear a massive number of defaults. That is especially true for some of these lower tier card issuers, who have a huge percentage of their customers with lower credit scores. During such times they look to lower their exposure, especially to those most likely to default. credit cards are not a right guaranteed by the Constitution. It often has nothing to do with the person whose card is closed, just the strength of the economy and seeing so many becoming unemployed. I am sure they have actuarial charts that show how higher unemployment leads to higher defaults, and can actually predict the number of defaults that will happen. I am 61 years old, and I have never seen all these businesses closing for any reason for an extended length of time. That creates great uncertanty, and financial markets hate uncertanty. They do not know if or when the restrictions will be lifted, nor do they know if an attempted ramping back up of business might lead to the flattened curve going up again. Like almost every business, great uncertanty makes cash king, and they start liquifying assets.

The problem with that reasoning is the nature of the closures.

Synchrony isn't closing accounts with $300 limits for borrowers with 640 FICOs. They're closing accounts of prime borrowers with huge CLs, regardless of UTIL or FICO.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

kdm31091 — Sat, 18 Apr 2020 23:52:40 GMT

Banks do not close accounts or decrease limits for "no reason". We may not agree with, like, or understand the reason, but it's not randomly pulled out of a hat.

Banks are not going to call you to discuss things, or to warn you, because if they did so, you could just rack up a bunch more charges and not pay them out of anger, to "stick it" to the bank. So they're not going to warn you about these things.

Some banks are more prone to doing it than others but almost every bank we discuss around here can and does perform account closures/limit decreases. Synchrony is just a current example. We've seen it from Amex, Comenity, Chase, Citi, BoA, etc, the list goes on. If you choose not to do business with any bank who may take your limit away, well, you won't have many if any choices! A CU is probably your best bet in that situation and even then nothing is guaranteed.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

user979797 — Sun, 19 Apr 2020 00:01:00 GMT

By taking away credit lines that we prove responsible enough to obtain to begin with they are not just protecting themselves; they want us to pay them interest and use their cards to make them money but during a crisis they get to cancel because they are afraid? They aren't brokers they are credit card grantors. Closing accounts with long-term loyal customers who have done nothing wrong and have a good credit history both through reports and the bank itself does not in anyway protect them during this crisis; it just makes them feel more protected and it screws the customer who may depend on that well earned credit line.

I could understand if they looked at credit reports and noticed they were starting to fail with other accounts (THIS would be protection) but this is not what people are posting. I am talking about closing accounts on loyal honest customers who have done nothing but pay on time and have not given any reason to indicate they will not continue to do so.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

user979797 — Sun, 19 Apr 2020 00:05:10 GMT

"Banks do not close accounts or decrease limits for "no reason". We may not agree with, like, or understand the reason, but it's not randomly pulled out of a hat.

Your right. They do have a right to close accounts for their reasons. And your also right that several banks have done this before and will continue to do so. But banks that make a habit out of it, I can choose not to bank with them. There are several banks besides Citi and Synchrony and Amex out there that do not practice this so easily and I normally wouldn't complain and just say it's part of it but during a rare emergency pandemic that's when I care and it matters and it's worth speaking out

Re: Credit Cards that are closing accounts or decreasing limits for no reason

Anonymous — Sun, 19 Apr 2020 01:00:02 GMT

All of this simply reinforces the fact that banking is a business, it's not personal. By and large, we are numbers to them. They don't dislike any of us, they just use their algorithms to determine what they see to be their best interests and act accordingly. Reverse the situation and we would do the same if it was our money that others were using. It IS their money we are using and that means they call the shots. We don't have to like it. Does it suck? Sure, but can we really blame them for protecting themselves? No. It's the nature of credit, for better or worse.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

CreditCrusader — Sun, 19 Apr 2020 01:09:04 GMT

@Anonymous wrote:
All of this simply reinforces the fact that banking is a business, it's not personal. By and large, we are numbers to them. They don't dislike any of us, they just use their algorithms to determine what they see to be their best interests and act accordingly. Reverse the situation and we would do the same if it was our money that others were using. It IS their money we are using and that means they call the shots. We don't have to like it. Does it suck? Sure, but can we really blame them for protecting themselves? No. It's the nature of credit, for better or worse.

Correction: The easing they are receiving through the Fed is not THEIR money, but rather created...and we will pay both interest and inflation in order for them to have it.

Due respect, I don't really see any value in coddling their "interests" when they treat us like numbers...and not all lenders see us that way, or else recon wouldn't work and credit unions wouldn't take chances on PEOPLE instead of numbers.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

kdm31091 — Sun, 19 Apr 2020 01:31:45 GMT

@CreditCrusader wrote:
and not all lenders see us that way, or else recon wouldn't work and credit unions wouldn't take chances on PEOPLE instead of numbers.

There's actually been a trend away from recon and towards automated decisions with a variety of banks, IMO because they don't want human emotion involved in lending decisions (and to save money on paying people to manually review apps)

Re: Credit Cards that are closing accounts or decreasing limits for no reason

CreditCrusader — Sun, 19 Apr 2020 01:36:23 GMT

@kdm31091 wrote:
@CreditCrusader wrote:
and not all lenders see us that way, or else recon wouldn't work and credit unions wouldn't take chances on PEOPLE instead of numbers.
There's actually been a trend away from recon and towards automated decisions with a variety of banks, IMO because they don't want human emotion involved in lending decisions (and to save money on paying people to manually review apps)

Hence the reason many are moving to credit unions in lieu of banks. CUs are about building lasting financial relationships, but just counting money.

But again, to each their own.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

Anonymous — Sun, 19 Apr 2020 01:41:55 GMT

@CreditCrusader wrote:
@kdm31091 wrote:
@CreditCrusader wrote:
and not all lenders see us that way, or else recon wouldn't work and credit unions wouldn't take chances on PEOPLE instead of numbers.
There's actually been a trend away from recon and towards automated decisions with a variety of banks, IMO because they don't want human emotion involved in lending decisions (and to save money on paying people to manually review apps)
Hence the reason many are moving to credit unions in lieu of banks. CUs are about building lasting financial relationships, but just counting money.

But again, to each their own.

And there's nothing wrong with that. Banks mitigate their risk through CLDs and closures, consumers can mitigate risk by working with institutions less apt to do that.

As for the business side, they lend money. We use money. They can turn off the tap, we can close accounts. We no longer have the use of their money, they no longer make anything off of us on swipe fees and/or interest/fees. It works both ways.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

Anonymous — Sun, 19 Apr 2020 01:53:48 GMT

@user979797 wrote:
By taking away credit lines that we prove responsible enough to obtain to begin with they are not just protecting themselves; they want us to pay them interest and use their cards to make them money but during a crisis they get to cancel because they are afraid? They aren't brokers they are credit card grantors. Closing accounts with long-term loyal customers who have done nothing wrong and have a good credit history both through reports and the bank itself does not in anyway protect them during this crisis; it just makes them feel more protected and it screws the customer who may depend on that well earned credit line.

I could understand if they looked at credit reports and noticed they were starting to fail with other accounts (THIS would be protection) but this is not what people are posting. I am talking about closing accounts on loyal honest customers who have done nothing but pay on time and have not given any reason to indicate they will not continue to do so.

Bolding the bits I have problems with!

Firstly, you cannot rely on what people are posting as being the whole story, we see this time and time again here. It's not (usually anyway) that the poster is being deliberately misleading, they often don't understand that X is a trigger so they don't mention it. Issuers are certainly not closing at random, the algorithms indicate some perceived risk, which can be something like too high CL with the issuer, even with a perfect payment history and high score, it IS still a risk greater than those with similar history/score but lower exposure.

In addition, sometimes there is more to the story, too much recent credit seeking or whatever.

Why does the bank feel more protected by doing things that "does not in anyway protect them during this crisis" Presumably, their models show that doing this DOES in fact protect them. After all, why give up profitable non-risk customers? They are a business, they are not our friends but they are also not interested in arbitrarily hurting us. Yes, their models can be wrong, but without any access to them, we cannot make that assumption.

Finally, well-earned credit line. Many of the recent cases are from Sync, which, in better times, has given out high limits like candy for those with good scores. And even those with less good scores. As I said in another thread, there has to be some understanding of easy-come easy go.

Plus, we are always free to close our cards, even if the issuer has performed perfectly, giving us the stated rewards, billing and crediting every month etc. If people really want more protection against AA (including CLD) we would need contracts that would have obligations on us, e.g. promise to charge $500 a month for 5 years, with penalties for early termination.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

CreditInspired — Sun, 19 Apr 2020 01:55:18 GMT

@Anonymous wrote:
@CreditCrusader wrote:
@kdm31091 wrote:
@CreditCrusader wrote:
and not all lenders see us that way, or else recon wouldn't work and credit unions wouldn't take chances on PEOPLE instead of numbers.
There's actually been a trend away from recon and towards automated decisions with a variety of banks, IMO because they don't want human emotion involved in lending decisions (and to save money on paying people to manually review apps)
Hence the reason many are moving to credit unions in lieu of banks. CUs are about building lasting financial relationships, but just counting money.

But again, to each their own.
And there's nothing wrong with that. Banks mitigate their risk through CLDs and closures, consumers can mitigate risk by working with institutions less apt to do that.

As for the business side, they lend money. We use money. They can turn off the tap, we can close accounts. We no longer have the use of their money, they no longer make anything off of us on swipe fees and/or interest/fees. It works both ways.

A perfect analogy.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

CreditInspired — Sun, 19 Apr 2020 02:01:56 GMT

@Anonymous wrote:
@user979797 wrote:
By taking away credit lines that we prove responsible enough to obtain to begin with they are not just protecting themselves; they want us to pay them interest and use their cards to make them money but during a crisis they get to cancel because they are afraid? They aren't brokers they are credit card grantors. Closing accounts with long-term loyal customers who have done nothing wrong and have a good credit history both through reports and the bank itself does not in anyway protect them during this crisis; it just makes them feel more protected and it screws the customer who may depend on that well earned credit line.

I could understand if they looked at credit reports and noticed they were starting to fail with other accounts (THIS would be protection) but this is not what people are posting. I am talking about closing accounts on loyal honest customers who have done nothing but pay on time and have not given any reason to indicate they will not continue to do so.
Bolding the bits I have problems with!

Firstly, you cannot rely on what people are posting as being the whole story, we see this time and time again here. It's not (usually anyway) that the poster is being deliberately misleading, they often don't understand that X is a trigger so they don't mention it. Issuers are certainly not closing at random, the algorithms indicate some perceived risk, which can be something like too high CL with the issuer, even with a perfect payment history and high score, it IS still a risk greater than those with similar history/score but lower exposure.
In addition, sometimes there is more to the story, too much recent credit seeking or whatever.

Why does the bank feel more protected by doing things that "does not in anyway protect them during this crisis" Presumably, their models show that doing this DOES in fact protect them. After all, why give up profitable non-risk customers? They are a business, they are not our friends but they are also not interested in arbitrarily hurting us. Yes, their models can be wrong, but without any access to them, we cannot make that assumption.

Finally, well-earned credit line. Many of the recent cases are from Sync, which, in better times, has given out high limits like candy for those with good scores. And even those with less good scores. As I said in another thread, there has to be some understanding of easy-come easy go.

Plus, we are always free to close our cards, even if the issuer has performed perfectly, giving us the stated rewards, billing and crediting every month etc. If people really want more protection against AA (including CLD) we would need contracts that would have obligations on us, e.g. promise to charge $500 a month for 5 years, with penalties for early termination.

Exactly!

I think more borrowers have to adopt the (QTIP) method--Quit Taking It Personally!! Banks are in business to make a profit.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

user979797 — Sun, 19 Apr 2020 13:56:35 GMT

Thank you all for your insight and wisdom on this matter.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

CreditCrusader — Sun, 19 Apr 2020 14:02:01 GMT

@CreditInspired wrote:
@Anonymous wrote:
@user979797 wrote:
By taking away credit lines that we prove responsible enough to obtain to begin with they are not just protecting themselves; they want us to pay them interest and use their cards to make them money but during a crisis they get to cancel because they are afraid? They aren't brokers they are credit card grantors. Closing accounts with long-term loyal customers who have done nothing wrong and have a good credit history both through reports and the bank itself does not in anyway protect them during this crisis; it just makes them feel more protected and it screws the customer who may depend on that well earned credit line.

I could understand if they looked at credit reports and noticed they were starting to fail with other accounts (THIS would be protection) but this is not what people are posting. I am talking about closing accounts on loyal honest customers who have done nothing but pay on time and have not given any reason to indicate they will not continue to do so.
Bolding the bits I have problems with!

Firstly, you cannot rely on what people are posting as being the whole story, we see this time and time again here. It's not (usually anyway) that the poster is being deliberately misleading, they often don't understand that X is a trigger so they don't mention it. Issuers are certainly not closing at random, the algorithms indicate some perceived risk, which can be something like too high CL with the issuer, even with a perfect payment history and high score, it IS still a risk greater than those with similar history/score but lower exposure.
In addition, sometimes there is more to the story, too much recent credit seeking or whatever.

Why does the bank feel more protected by doing things that "does not in anyway protect them during this crisis" Presumably, their models show that doing this DOES in fact protect them. After all, why give up profitable non-risk customers? They are a business, they are not our friends but they are also not interested in arbitrarily hurting us. Yes, their models can be wrong, but without any access to them, we cannot make that assumption.

Finally, well-earned credit line. Many of the recent cases are from Sync, which, in better times, has given out high limits like candy for those with good scores. And even those with less good scores. As I said in another thread, there has to be some understanding of easy-come easy go.

Plus, we are always free to close our cards, even if the issuer has performed perfectly, giving us the stated rewards, billing and crediting every month etc. If people really want more protection against AA (including CLD) we would need contracts that would have obligations on us, e.g. promise to charge $500 a month for 5 years, with penalties for early termination.
Exactly!

I think more borrowers have to adopt the (QTIP) method--Quit Taking It Personally!! Banks are in business to make a profit.

I think you are misconstruing the points that many of us are making.

This is BAD business...and it comes at the worst possible time for retailers who, quite frankly, desperately need the online business of customers who are having accounts closed right now.

Plus, it jabs largely great-credit consumers and punished them for limits they LENDER granted in the first place. If they were THAT concerned with their long-run exposure, then why do they hand out the large lines they're closing now in the first place? 🤔

Re: Credit Cards that are closing accounts or decreasing limits for no reason

pcmedic2k — Sun, 19 Apr 2020 14:31:34 GMT

I am guessing those that are here defending the banks decision to close without warning, the accounts of long-standing customers with good history will change their tune when it hits one of them. Think of what this does to the consumers credit score when a significant jump in their utilization takes place because of this. Their scores drop, their other creditors now panic and close or CLD those accounts. In many/most cases leaving them now making monthly payments to pay-off closed accounts they no longer have use of.

Re: Credit Cards that are closing accounts or decreasing limits for no reason

vic6string — Sun, 19 Apr 2020 15:10:49 GMT

I wonder if somwhere there is a bankers forum where you hear them say stuff like "Can you believe we gave that guy $500 to open a credit card, he never once carried a balance, never once paid interest, he used exactly the 12 months we gave him at zero interest on the max balance transfer, and then he downgraded it to the no annual fee card and sock-drawered it?!" I don't see anyone apologizing to them for that on these forums very often.

Everything in life has multiple angles to look at it from. The original poster's argument makes absolute sense from their angle, but that is just one angle. How about the employee at the bank who loses his job because the bank lost so much money to so many bankruptcies. How about the retiree who lives off of dividends from bank stocks he spent his life buying that now get cut because the banks just can't support them anymore? I am sure they are thinking "If they saw this coming, why didn't they just stop giving out new cards and cut the crazy limits and close cards that they weren't 100% sure were safe?" How about the newly married 25 year old couple with a thin new file trying to buy their first new home 5 years from now but they can't get a loan because the banks have tightened up so much from their losses during the pandemic that they can't get decent credit cards to build their scores to even qualify for a loan. I bet they'd be saying "If the banks would have just cut their risk then, they'd be okay to give us money now. We didn't screw them up, why are we the ones getting screwed?!"

Re: Credit Cards that are closing accounts or decreasing limits for no reason

Anonymous — Sun, 19 Apr 2020 16:01:54 GMT

@pcmedic2k wrote:
I am guessing those that are here defending the banks decision to close without warning, the accounts of long-standing customers with good history will change their tune when it hits one of them. Think of what this does to the consumers credit score when a significant jump in their utilization takes place because of this. Their scores drop, their other creditors now panic and close or CLD those accounts. In many/most cases leaving them now making monthly payments to pay-off closed accounts they no longer have use of.

Or, maybe some of believe that are arguments are valid. I've had Citi, Cap One, Amex, Penfed close accounts as well as CLDs from other lenders. The inconvenience to me doesn't mean that I can't understand why it was a rational thing for the banks to do.

And in your scenario, if closing the accounts causes a huge utilization increase, that can only be the case if there was a fairly large balance, and that indeed does represent a potential risk to the lender.

I guess it needs repeating: Banks are not going to make business decisions that they think are bad. They can of course be wrong and make terrible ones (see 2008 and CDOs) but our pain doesn't make them wrong. As with any corporation, the primary obligation is to share holders, whatever lipservice is paid to employees and community, so maximizing gains and reducing risk is what they have to do.