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

[CreditCrusader]

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@kdm31091 wrote:

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@CreditCrusader wrote:

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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.

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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)

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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.

[Anonymous]

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@CreditCrusader wrote:

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@kdm31091 wrote:

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@CreditCrusader wrote:

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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.

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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)

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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.

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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. 

[longtimelurker]

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@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.

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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.

[CreditInspired]

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@Anonymous wrote:

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@CreditCrusader wrote:

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@kdm31091 wrote:

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@CreditCrusader wrote:

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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. 

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A perfect analogy. 

[CreditInspired]

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@longtimelurker wrote:

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@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.

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Exactly! 

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

[user979797]

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

[CreditCrusader]

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@CreditInspired wrote:

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@longtimelurker wrote:

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@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.

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Exactly! 

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

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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? 🤔 

[pcmedic2k]

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.

[vic6string]

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?!"

[longtimelurker]

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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.