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

[CreditCrusader]

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@NRB525 wrote:

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@user979797 wrote:

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.

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Leading up to the 2007-2008 credit crisis, I had taken growing cash advances and balance transfers from multiple banks, leading to significant outstanding balances as high percentage of credit limits. I never missed a payment, I didn't exceed any credit limits. 

Citi, Chase, and BofA proceeded in various combinations to CLD, balance chase or close the accounts I had with them. They were very justified in doing so. I had no right to expect them to maintain $20k to $30k credit limits while I had nearly that much owed on each account in a time when defaults were rampant.

As has been noted by others, banks are not in this to give people free money, and we do not have a right to credit. Accounts that get closed or CLD have a trigger reason the bank is responding to. We don't always get all the story here, but each story has reasons for the bank action to reduce risk.

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True, but banks also lend money they do not have via fractional reserve (which depends on, among other things, a balance of OUR deposits)...and they have a steady stream of cash per the Fed's easing to the tune of TRILLIONS. Everyday Americans do not enjoy such preferential treatment.

Maybe asking them to not kneecap their borrowers at the first sign of market turmoil, particularly when we know it's pandemic-related and temporary, isn't out of line.

[Anonymous]

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@CreditCrusader wrote:

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True, but banks also lend money they do not have via fractional reserve (which depends on, among other things, a balance of OUR deposits)...and they have a steady stream of cash per the Fed's easing to the tune of TRILLIONS. Everyday Americans do not enjoy such preferential treatment.

Maybe asking them to not kneecap their borrowers at the first sign of market turmoil, particularly when we know it's pandemic-related and temporary, isn't out of line.

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What I don't know is if this is happening to "normal" customers, those with a handful (at most) of cards that they have had for years.   If the closures are focussed more on MyFico types, then we also need to show restraint as part of the bargain: don't spree, don't ask for unneeded CLIs, these may just be storing up trouble for when hard times hit the banks.

[Anonymous]

This article popped up on my news feed and it talks about Synchrony's risky portfolio

https://seekingalpha.com/article/4338526-synchrony-financial-out-of-sync

Holding $87 billion in loan assets against just $12 billion in tangible book value at the end of 2019 (subtracting about $3 billion in goodwill and intangible assets from $15 billion in net accounting equity), a default rate of 15% would effectively put Synchrony into bankruptcy itself.

[CreditCrusader]

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@Anonymous wrote:

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@CreditCrusader wrote:

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True, but banks also lend money they do not have via fractional reserve (which depends on, among other things, a balance of OUR deposits)...and they have a steady stream of cash per the Fed's easing to the tune of TRILLIONS. Everyday Americans do not enjoy such preferential treatment.

Maybe asking them to not kneecap their borrowers at the first sign of market turmoil, particularly when we know it's pandemic-related and temporary, isn't out of line.

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What I don't know is if this is happening to "normal" customers, those with a handful (at most) of cards that they have had for years.   If the closures are focussed more on MyFico types, then we also need to show restraint as part of the bargain: don't spree, don't ask for unneeded CLIs, these may just be storing up trouble for when hard times hit the banks.

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That is a hell of a point. You nailed it. Many folks could be doing it to themselves by rolling up $20k+ CLs to create the illusion that their UTIL is lower, when in fact the UTIL for cards they actually use is quite high.

I confess that I missed this particular perspective and may have unfairly tarred and feathered the lenders accordingly.

[adelphi_sky]

I look at it this way. A bank knows what its risk exposure is at all times. Also, it is SUPPOSED to have enough cash on hand to cover a certain amount of defaults. I think that is in the Dodd/Frank act or something. Banks need to learn how not to assume too much risk it can't cover. 

The problem people have is, after these banks extend so much credit on the front end, and then they want to cut it on the back end. Which means the banks overextended themselves on offering credit. Bad business.

Here is a fantasyland example. HOw about banks extend only enough credit up front that falls within a safe risk profile to where if there were mass default, they have the cash to cover. So, when there is a rise in unemplyment, credit limits stay the same and accounts remain open. Banks can even deny new apps and CL increases for the short term. So, if a bank exposed itself to $50bln in credit, it has $50bln to cover. Now of course not everyone will default. So, they could have maybe $25bln to cover defaults. Nothing more, nothing less. It's almost like checking. Banks have to have enough cash to cover mass withdrawls of cash if necessary.

Yet, in the real world, banks don't ave to manage risk at all. They just slash and crash customers' credit lines at will causing uncertainty and unecessary stress on the customer. 

I blame the banks. Don't offer me something and tie me to a contract to where I can't change the terms but you can without a moments notice. That's bad business. Yes, we sign those contracts. But we should and can demand more from banks through Congress. But Americans are fat and happy. They give us crumbs and we say it is the greatest thing in the world. People need to start getting mad and really make impacts instead of just bending over. 

People in other countries outright riot if they feel their government is not protecting them sufficiently. WE're simply not angry enough to change legislation. 

I would like a law that says if I am in good standing with a creditor, they can't close my account or reduce my credit line without my consent. Right now, they can adversly affect our credit profile and we have no power against it. And good standing can mean having at least a 36 month hstory with the bank with no late payments. At least that gives good long-standing customers some protections. 

[werthere]

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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 applied with BofA for a PPP loan. Absolutely horrendous experience. Can't get anywhere, no one to talk to, stuck in limbo, absolute chaos. Anyways my business banker told me he had to turn off his email because of threats from business owner, threats. 

I'm looking at it from different perspective. If and when I don't get that loan I will pull three times as much money out my bank accounts with them than the stupid PPP loan they may give me. If they're going to treat me this way and potentially hurt my business, I can play the same game.

Moral of the story is, don't get mad, get even.

[Anonymous]

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@AllZero wrote:

Congratulations on no CLD! You want to put a charge on them every 6 months or so to avoid closer for non-activity.

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I'd do it a little more often than one per 6 mos to decrease odds of CLD even more. Institutions may step up CLD in the next few months.

[Anonymous]

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@adelphi_sky wrote:

I would like a law that says if I am in good standing with a creditor, they can't close my account or reduce my credit line without my consent. Right now, they can adversly affect our credit profile and we have no power against it. And good standing can mean having at least a 36 month hstory with the bank with no late payments. At least that gives good long-standing customers some protections. 

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And in return you will have to keep the card open for .... years and spend XXXXX a year.   That's only fair

[Anonymous]

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@adelphi_sky wrote:

I would like a law that says if I am in good standing with a creditor, they can't close my account or reduce my credit line without my consent. Right now, they can adversly affect our credit profile and we have no power against it. And good standing can mean having at least a 36 month hstory with the bank with no late payments. At least that gives good long-standing customers some protections. 

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More laws are not the answer. They are typically one way. If we were to go in that direction, then the law has to provide for the other party. Their side might say since I cannot close your account because you are in good standing, you must charge a minimum of $50/mo and PIF. I don't think you'd want to be handcuffed either.

[AllZero]

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@Anonymous wrote:

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@AllZero wrote:

Congratulations on no CLD! You want to put a charge on them every 6 months or so to avoid closer for non-activity.

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I'd do it a little more often than one per 6 mos to decrease odds of CLD even more. Institutions may step up CLD in the next few months.

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I agree. One should look at the lender and available credit line. Certain lenders can be more skittish than others.