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

[CreditCrusader]

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@Anonymous wrote:

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@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.

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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.

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You need not repeat yourself. Everyone here is reading and understanding both sides. There is disagreement, nothing more.

[Anonymous]

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@CreditCrusader wrote:

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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? 🤔 

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Why is it BAD business for the lenders, which is all that matters for them in making the decision.   Their obligation is to the shareholders, not retailers or consumers.  (And if the bank has loaned to the retailers, they will often be secured, so less of a concern)

We don't know that "great credit" consumers are being targeted, there is presumably some concern.   And yes, the lender gave them limits in a totally different environment, now people have lost jobs and it's harder to get new ones.

And for those who wish to be "this is all so terrible for the poor credit card holder and those horrible people are defending banks..." consider what a first world problem this is.   "My credit score is tanking" vs "my babies are dying because I can't afford food or medicine"

[Remedios]

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@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.

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I'm not sure why you think rational explanation for these events, or any AA is "defending" a lender. 

It's not. Those are attempts to explain the behavior lenders engage in during good times, and during bad times. 

They mitigate percieved risk, they dont stop and wait to see what happens next. 

Someone with $99,999.00 in exposure with Synch may not appear as a risk because balances are all $0.00

That also means those cards can be run up as high as lender will allow, therefore significantly increasing the risk of default.

Also, there is nothing on CR that says "Card maxed because in 0% promo" or " Really nice person, will pay later". 

Bottom line is, we cannot control what they do. We can only control what we do. Explaing why they might be doing it is not to gloat, but hopefully to help others avoid similar situations. 

If I got an account closed today, it wouldn't be because of something I'm doing right now (utilization at 2%, DTI at 5%, high-ish scores, income supports my CLs), but because of what I could do if maxed only a couple of cards. 

I'd hate to see any of them closed at any point, but I understand what it looks like in terms of risk assessment. 

[seattletravels]

^what she said (@Remedios)

[Brian_Earl_Spilner]

In regards to comenity and synchrony, everyone needs to remember that our views are skewed. The average person is not going to have a $30k credit line for Hot Topic or Chevron, let alone $100k in credit lines per lender. So, why wouldn't they start slashing unused limits or trying to protect themselves? 

There are also other non-traditional factors possibly involved. A popular form of business recently is retail arbitrage, where someone will buy out a store and sell the items for more (think scalpers). In addition, having grown up poor and around poor people, a form of getting quick cash is buying something like an iPhone on credit, then selling it, or pawning it, even if it's for a loss, so that you have money to buy food. 

With so many people out of work, I've seen an uptick in retail arbitrage. A good example is the Nintendo Switch. Right now, people can't find them in stores. That's because someone with a $30k line of GameStop credit has been buying them all up to sell on Craigslist, OfferUp, and eBay. We saw it with toilet paper, sanitizer, PPEs. Where do you think they're getting that capital from? As the economy gets worse, people will find creative ways to get blood from a stone. It would be silly to think that lenders aren't aware of such things.

[Anonymous]

^^^ as someone who has been actively searching for a Switch for his kids, I can agree with this completely.

[pooragain]

As we can all see, Synchory more then many other issuers seem to be doing more closures/CLD then anyone else. We have to remember that they are also the one who has been giving out credit lines that are way out of line with any reasonable expectation. Why would anyone need or want a $30,000 store card. I understand padding for utilization purposes, but that is just a way for the comsumer to falsly improve his/her credit score if they are carrying balances. At some point, I feel like the banks look beyond the beloved FICO score and simply look at dollars owed as opposed to % owed vs reported income, and as many people that have reported closures/CLD have stated, they have 5 or 6 times their annual income in credit lines. That leads me to the bigger question being not why they are closing them now, but why they ever approved such lines in the first place. 

[tricie17]

Great analogy.  So funny!  lol

[kdm31091]

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@Anonymous wrote:

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And for those who wish to be "this is all so terrible for the poor credit card holder and those horrible people are defending banks..." consider what a first world problem this is.   "My credit score is tanking" vs "my babies are dying because I can't afford food or medicine"

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This x1000. Yes, this is an annoying situation for those it happens to, but keep things in perspective. It's not the end of the world. Beyond that, most of us on this forum have far more credit than we actually need or would even come close to using.

[SouthJamaica]

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@user979797 wrote:

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

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I agree with you 100%.

There are many factors that go into choosing a financial institution. One factor we should consider is dishonorable behavior and disloyalty towards its good customers.

For Synchrony to close accounts which are in good standing and have always been maintained in good standing, at a time when the Federal Reserve has made trillions of dollars available to financial institutions and slashed Federal Reserve borrowing rates virtually to zero, solely for the sake of decreasing its credit reserves, is dishonorable and disloyal.

A real black mark on Synchrony's name.

I have a hunch that in the end it will come back to bite the cowardly executives who embarked on this program of cannibalizing the bank's customers.