AmEx rates credit risk by where you live, shop

The credit card company had an opportunity to check out the member before issuing a card. The annual membership fee is $400.00 for this card which they offer in services of reduced flight cost back to you during the year.  If once you obtain the card they change it on you or cancel the service you loose the $400.00 membership fee and the ability to collect it through their services.  Not to mention that seems very much like "red flaging" an area where banks used to get in big trouble for not lending to a person becasue of their zip code or neighborhood or side of town they lived in.  If he is a credit risk fine cancel his card but, if you took a membership fee at least part of it should be refundable or Amex should be held under fraud charges or false advertising or both.

I don't think this is about a $400 fee.  I totally agree with Roland.  When starting a business, credit is often necessary, but an established business, that was apparently doing very well, should have enough collateral built up to cover the ups and downs of their monthly cash flow.  Especially since he was very aware of his cash flow needs.  It's just good business practice.  Someone that doesn't take into consideration that the economy rises AND FALLS, seems like a risk to me as well.  I don't blame AmEx for minimizing risk in this economic climate.  It sounds to me that he just needs to take a good accounting/finance class.

Or, just quit using Amex.....

Wow---its amazing how much some people can ASSume about someone from a "news" article!  If he was paying AmEx back all that he was supposed to on time---do you honestly think he should be penalized for what he purchased or where he lives?

do you honestly think he should be penalized for what he purchased or where he lives?

Do you know something we don't?

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Anyone who owns a small business can tell you what a nightmare American Express is. They're worse than an insurance company whose only employees are actuaries.

It's pretty self-evident that Amex is bad for customers and bad for small businesses. It's about time they go down the toilet with Wall Street.
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My business is only 4 years old. I have a significant line of credit with AmEx. I rely on that line of credit because I do not receive payment for my services until they are complete. I do not carry a balance unless absolutely necessary and then pay the remaining balance off as soon as possible. I have proven with my track record that I am a minimal risk. My house is worth 2 1/2 times the amount that I owe, so my mortgage is not an issue. I thought I had covered all of the bases. My business is healthy and the decrease in my line of credit should not hurt me, however because they cut my credit by 25%, I am now in a situation where if something should go wrong I have a smaller parachute to lessen the fall. My company was on it's way to having enough collateral to be self sufficient, but now I fear that nest egg will have to be used for day to day operations. In effect, what AmEx did by cutting my line of credit was to take a new stable business and turn it into a new unstable business.

If you are paying $400 annually for the privilege of borrowing their money. You are touching your toes for them anyway.

In reading this story, I was amazed to hear how fragile the american economy is. Here's a small business owner who is pretty much living on his credit. Roland, to give you some background, small computer companies like this are poorly run, not by MBAs and business specialists, but technicians who come across companies looking for services. Plus, a computer security firm is a luxury item in the eyes of many. Not a company that businesses need for day to day operations, but something that is needed to minimize business loss. And often, a boutique business like this is the first to go under in a crunch market. So they do not market properly to build up sufficent clientele, and consiquently, retain suffiecient funds. I worked for a AS400 treaining company for 3 years, and we were broke every month and lived off our credit cards. And when a business card is being used at Target, Best Buy, etc, you are using your business credit to fund your personal life. Unfortunately, small businesses like this often get sucked into visiting clients to pitch deals, so travel is essential, often before a contract or work is profermed. On top of that, work is often based on a SOW, Statement of Work, and payment is invoiced after work is performed. And its hard for these small companies to break the mold to bill on schedule or collect fees as a retainer. The credit card companies are simply bending to market pressures and if secondary markets are no longer funding risky portfolios, what choice do they have?

One comment, the party is not over. There's still a crap load of money out there, but we can't free load and get in the party because "Jim told me to swing by". If you are a small business owner, you really need to look at how you run your business. Too many small business owners run around like they're Trump, driving Porsche's and BMWs, but live day to day in their business life. Time to get back to American values, of having a life and family, and stop watching HGTV as your life inspiration. How is it that you can't even buy a TV for less than $600 these days? $1500 TV are flying out the door, and yet we can't understanhd how we got so in debt? Conspicous consumerism, also known as The Candle That Burns Twice As Bright

I have two Amex cards with a $2500 credit limit on both, I went to make a payment and noticed my credit limit was lower with out anyone ever contacting me. Once I called they informed me they would send out a letter to explain the change. Thanks alot. Oh! but there's more Chase, and Bank of America did the same thing. I have never missed a payment and always paid over the min. amount due, because of these changes my credit score has dropped, and my debt to income ratio has risen. What do I need to do shoot myself like the 90 year old lady in Ohio to get some attention or maybe they would like for me to kill my entire family like the guy in California. I would bet my paycheck that the credit lines for the CEO of Freddie and Fannie Mac have not been lowered and we all now they have money management problems but I forgot those people get rewarded for that, everyday people get penalized just for working hard, paying taxes, and abiding by the law. That's the modified AMERICAN DREAM!!!!!!

IF you have good credit and you're an aspiring small business owner then there are still places you can turn to for revolving credit, such as credit unions or other small credit companies like

http://www.plumbusinessfinance.com

Also think about leasing large office items (tax write off) to lessen the monthly costs until you can get that revolving credit again

I have two Amex cards with a $2500 credit limit on both, I went to make a payment and noticed my credit limit was lower with out anyone ever contacting me. Once I called they informed me they would send out a letter to explain the change. Thanks alot. Oh! but there's more Chase, and Bank of America did the same thing. I have never missed a payment and always paid over the min. amount due, because of these changes my credit score has dropped, and my debt to income ratio has risen. What do I need to do shoot myself like the 90 year old lady in Ohio to get some attention or maybe they would like for me to kill my entire family like the guy in California. I would bet my paycheck that the credit lines for the CEO of Freddie and Fannie Mac have not been lowered and we all know they have money management problems but I forgot those people get rewarded for that, everyday people get penalized just for working hard, paying taxes, and abiding by the law. That's the modified AMERICAN DREAM!!!!!!

HMMMM!!!  I am a Real Estate Broker.  We have a Cosco American Express with 14.99 interest and WAS at a $16,500 credit limit.  For the same reasons as the person in this article our limit was lowered to $10,580.  (This gave us a small margin above where we had just put items on this card.)  We were traveling in ITALY.  Nope, I'm not complaining about what I owe to AE.  I spent it and will pay it back timely!  Their REASONS just pissed me off royally!  We have NEVER been late paying this card (although I would like to sometimes be able to run into Costco and pay on it, but do it most of the time via the computer.)   As stated above, we used the card when traveling outside the US.  (BTW, the Euro vs the Dollar sucks, but I am watching....when it comes down to an equivalent, if ever, I WILL buy Euros for our next trip and be better prepared!)

AE stated where we shop as one of the reasons.  We DO have our mortgage with Countrywide, which is now BofA.  This is just a fact and we cannot change that one.  We have NEVER in 30 years of owning a home been late on a house payment!  I did use the card recently at Home Depot (HEavens, does everyone default that shop at Home Depot?  I doubt it, but that is the implication ZE gave to us!) when we were moving the spa in the backyard (our usual vacation spot!) to buy the "stuff" needed to extend the electrical connections.  We also paid CASH to put in a pool in our back yard.  NOPE, NOT COMPLAINING!  Many don't have this luxury and we are very fortunate!  BTW this money came from my Mother in Law's estate when we sold TWO houses in West Virginia for a whopping $50,000... yep, folks, that TWO for $50K!  We took part of the money to enjoy Italy (a once in a lifetime chance to go) and part for the pool.  We can enjoy it knowing we don't owe one cent on it!  The balance we will go to Mexico to go to the dentist, since we don't have dental insurance. (Unfortunately I'd much rather go to an American dentist, but cannot afford the prices!!)   My husband is retired federal and our insurance rates are going up at 13% if we stay with BCBS! (The projected "raise" is maybe 3%, but by the time the "new administration..democract or replblican are elected" this will change.  They ALWAYS screw the Federal workers and retirees!  So, a 13% increase in BCBS rates and a 3% raise...that's NEGATIVE 10% living potential!) )  Nice for BCBS... am sure their co-pays will go up, too!  We wanted an insurance company that if we did travel we would be covered where-ever we were.  We will obviously have to look at other insurance plans this Open Season for this reason. 

Obviously, with the price of gas, food and daily living the retirement traveling is cut way back.  We do occasionally get offers for free rooms in Laughin, NV or Las Vegas, NV and we do occasionally take advantage of those just to get away for a couple of days.

I LOVE my job working as a Real Estate Broker, even in this suckie environment.  I try very hard to HELP my clients, even those that are selling their homes for less than what they owe (Short Sales).  If the )(#$*%& banks would work with us, we'd get a lot more sold!  Countrywide has just been the pits and seems to have some pie in the sky idea that these properties are worth more than they were 5 years ago!  Have had one with two viable offers and Countrywide said the condo was worth 140K and they would NOT give me any comparables or how they came up to that stupid figure.  NOTHING had sold in that complex in the last 5 years for that amount (i.e. EVER!).   The HOA is $205/mo.  It is a hard sell to anyone with that kind of HOA hanging over their heads and the money difference could be used toward a single family home.  The complex has one owner who has over 30%, which makes the complex non-FHA or VA insurable, so the only way to sell these is cash or conventional loans.  Countrywide sucks and needs to get viable assistance in their short sale departments.

As for the guy with his small business, all of us who own small business feel the credit crunch.  Everyone thinks Real Estate folks make a ton of money....nope.. We only get paid when the deal closes.  The banks are cutting our commissions, the sellers are trying to cut the commissions and they are getting inexperienced agents that are trying to handle short sales and Bank Owned (REO...Real Estate Owned) properties.  Granted, many agents have left the business because they didn't have sufficient funds to pay their Board Dues, MLS Dues, State Dues, National Dues, Advertising, gas for their cars, insurance for their cars (it costs more if you insure your car to carry clients...liability is much higher), Errors and Omission Insurance, Forms, Computer fees, Paper, Ink, Cable access....yep, the list grows and grows and many think we do this by just clicking on the computer....I have 20 years experience.  There is still something to be learned every day!  It is NOT a business for the faint of heart, inexperienced or those wanting to "make a million".  YEP, I can say I belong to the "Million Dollar Club" as so many put on their business cards...all that means is that I've sold properties totalling a Million or more...that's 5 200K homes, or 10 - 100K Homes...doesn't take rocket scientist to know that isn't much... at a 3% Commission that would be MAYBE $15,000, assuming I sold only on 1/2 of each transaction... Most transactions are less commissions right now, so at 2.5% that equals $12,500.  For this amount of money, I probably have worked 50-60 HOURS a week (yes, that includes computer time to find the right home, negotiatiating with the other agent, driving clients many miles ....in this market it is taking about 100 homes before we find one in decent condition enough to LIVE in, so that is a LOT of miles and gas and time!, Title Companies, lenders, many phone calls and e-mails...hmmm my hourly wage is scary...

Obviously I LOVE what I do for a living, so I refruse to think about the "hourly" or time spent.  The reward I get is a happy person at the end.  Either the seller who no longer has to worry about making the payments they cannot afford or the buyer who now has a home they are able to enjoy and make their own.  Amazing what smiles can do!  I am one of the fortunate few that have another income and we will pay our bills and eat no matter what I     do or don't bring to the bank account.  We are truly blessed.

We are in a changing times.  Our FICO is well above the 700 range.  I guard it very carefully and do NOT permit it pulled unless we deem it necessary.  I have made whatever concessions I can to keep myself afloat in this period.  So far have been in business for 21 years and married for 34, so we must be doing something right!  We will manage to survive this mess, but we may just well have to look back on how others survived the "Great Depression" and learn some of their survival methods.  It will not be pretty, but we are Americans and we will stand united, whatever it takes. 

I am so glad I read about this.  I thought I did something wrong.  I have four Amex cards for the various operations of my business.  I never charge a lot and pay in full every month and as soon as the statement comes in.  I was diagnosed with breast cancer.  I used my Platinum Card at D.F.C.I. to my buy my wig and ten days later all hell broke lose.  My cards were put at zero balance because of experiences with OTHER CUSTOMERS where I shopped.  They said I charged too much.  Three cards had ZERO balances and had not been used.  They called me twice.  Once while I was having chemo and they told me I had to talk to them, then and now.  They informed me that I needed to send them money right away, about 400 dollars, and the rest, about 200 dollars when I get my bill.  I was so dazed I said fine.  That night, I called Amex to be told I was a horrendous credit risk and they wanted the entire bill paid now.  I had not even gotten a statement yet.  He was sorry about the breast cancer but that is no excuse for running up debt.  I was so scared I paid them and never have used the cards since.  Oh, they did charge me this month the 400 dollar fee for the card.

My 34 year old house is assessed at two million.  I built it for 50,000.00 I have no mortgage.  A small Staples card and a vey small Home Depot card that are paid off every month.  Business is great for me but I have been frugal forever. I do not need these cards.  It was an expensive convience.  I now use my Bank of America Check card. My business is so well regarded.  My banker told me to get rid of American Express.  My accountant said that the fees I am paying to American Express for credit card  transactions in the business is a joke and for them to talk to me and do to me what they have done, I should kick them out.  In 2007, I paid over $97,000 in fees.  Yes, alot of people use an American Express card but the others are just as good.

You all may say what you like and blame this or that. We need credit cards.  I guess cash is no longer good enough.  You can not buy an airline ticket, hotel room, or car rental without a credit card.  American Express has BULLIED business into making it THE card to accept.  They toot their business acumen but really they are a slimey operation.  I will be so glad when they get caught for some wrong doing.  They destroyed whatever good will they have had.  Business is business and they are here to make money but I think they let loose some very rude (maybe young) bean counters who did not take a hard look at their customers.  I also pulled out all my 401k's and my Keough before they nosedived from American Express. Good Luck to all.

I agree with everything Roland said - especially about small business.  Small businesses should have a turn-around time for their invoicing.  Mine is 2 weeks with the potential of interest should the client exceed 30 days.  Also, as much as possible I use the client's corporate rates and payments (directly to them) for when travel or out-of-pocket expenses are necessary.

Now, to my own story with AmEx.  I was one of their biggest fans.  Loved it.  I've had their card for a number of years and did not have a spending limit - until recently.  One of their reasons was that my charges were outside my norm (so much for Forde's statement that they do not review what holders purchase).  The purchases they referred to were new tires for my car (had 2 flats in 2 weeks so it was time), and a few nights in a hotel (which, although none of their business, my client reimbursed me).  I also live in the DC metropolitan area.

What angered me about the limit being imposed is that I have always paid the current balance in full on the day it was due.  Additionally, AmEx had over $34K of my cash in one of their savings accounts (now it is a bit more).  I worked hard to get to the point of no spending limit and worked hard to keep it that way.  I liked the freedom of not worrying about a card being accepted because of a limit (although the limit they imposed is nearly twice what I have incurred on a monthly basis).  All I had to think about when I spend is "can I pay the bill this month?"  I always pay my bills in full each month.  Now I have to be concerned with an AmEx limit - regardless of how hard I work or how responsible I've been or am. 

I'll keep using AmEX, but I'm no longer a fan.

CFREEMA7

Amen to your coments above!  Hope you log into this blog later.  I would vote for your comment more than once if newsvine would let me!  I am glad I am not the only one to see this.  Too many small business are run on a shoe string by folks that are always chasing rainbows! 

This man's problem is that his clients are slow-paying him, so he needs the card to cover things until the checks finally come in.   He can't cut his slow-payers because he needs the work they bring even if it's slow-paying.

I can relate.  The company I work for is slow-paying everybody.  We've had various vendors cut us off.  We don't want to do this but our clients are slow-paying us too, and so we can't pay our bills on 30-day terms like we used to.  

On the other hand, I was reading the article wondering just which merchants would cause Amex to worry and the FIRST one that came to mind was Best Buy.  Why?  Look at their advertising approach and customers.  It's all "get the big screen NOW, pay later!" and push push push on the same electronic stuff that people have been buying with their home equity loans.  The customers in the store often look like they really can't afford the big screen but they're going to get it anyway.    Best Buy represents the kind of unwise spending that has gotten a lot of people in trouble, and therefore I can easily see why shopping at Best Buy would worry the card companies.

LREDDY. I guess you don't understand AM EX. Business cards. You purchase one month and pay the next. I have been doing business this way for 17 years. And I was resently shut off in the middle of a month and told I spent too much.There was no change from previous months or years. (No Limit). And now I am left without capital and will have to spend my cash so I probably won't beable to make a full payment.

I agree with LReddy...we've got too dependent on credit.  The system is correcting itself for being too lenient with credit...now the market doesn't support that.  It's bad business practice to not have enough collateral to cover at least 6 months to a year of expenses...just in case the economy takes the proverbial "cr*p".

BINGO

Hits the nail on the head.  Is it not time to live within our means in all aspects?

And who got people that way? Banks. The whole credit score scam is just that a fat scam so they can raise your rates to 29% or whatever. You talk about risk. The card companies must assume risk also. I do not use their lousy cards. I had one from a company that held my payment 6 months in a row until it was past due even though I sent one in registered mail with proof they got it three days befor the due date and they posted late charges in the morning of the due date and the payment in the afternoon. Best thing in the world is do not even have one they are all scams. Go buy one of those pay as you go cards. 5 buck a month service and 5 bucks when you load  it and never an added fee. I did business with Amex and never had a problem. Took out a visa an MC and all hell broke loose. This country has been taken over by creeps.  

The thing is...even big, if not HUGE companies do business this way. They don't use a charge card, just a line of credit or whatever the correct term is for taking short term loans to cover daily operating expenses.

Come on LREDDY, you have got to be kidding!  This guy changes to a 30-year fixed mortgage!  How is that risky?   And to say that if you shop at Store A makes you a credit risk?  Does that mean that if Warren Buffett buys something at Store A that he is a credit risk.  That is totally backward!  And STUPID!

I gave up my AMEX card years ago and would never go back.  There is no value to that card.

I second this motion, I've had it happen to me too; the credit limits were reduced as the balances went down.  CC financing for a new business is expensive but in tight times you do what you can do, this has negatively affected all aspects of my business from buying materials to fueling up my trucks.

Exactly. If you pay off, they don't get to rake in the interest and fees, which is what they are really after.

Coral. How much did you pay in interest each month when you didn't pay what you bought in full?  That's wasted money that could have been gaining interest in some other account.  Money you will never see again and have nothing to show for having had.  It amazes me.  Listen to Grandpal Frank - live within means. This can be done whether you are a small business, independent contractor, or simply discussing personel expenses.
Is it the banks and CEOs of the Wall Street firms that have run scams and caused this problem with the economy?  Absolutely!! Is is the people who get bank loans for a $500K house when they make $50k or less a year that has caused this problem?  Absolutely!!  Is it the fools that build their lives on quick sand trying to emulate the idiots in TV reality shows that can't count to four yet the entertainment industry sees fit to pay them hundreds of thousands if not millions of dollars per year that has caused this problem?  Absolutely!!
There has been no common sense from most of the people in the last 15 years on both ends - lenders and borrowers.  It amazes me that someone could say in one breath that they just put in a pool - and in the same breath complain that they have no insurance because they can't afford it!!!
It's called personel responsibility people.  We need to live within our means and set our priorities.  Yes, I've had financial troubles in the past.  Perhaps this is why I try to be responsible now - and make sure that I have 6-12 months cushion should anything happen.  Personel responsibility works - folks should try it!!

They hang you out to dry but lose billions on shady deals go figure.

I am not a young man. In the 60's we protested and marched and us old hippies warned this country there was too much power in our banking system Money corrupts! People did not listen for the most part or dismissed it now look at us.

I forced my credit score down and I am going to keep it there. If I cannot afford it I do not buy it. I am spending less than half of what I spent with those cards. If you reach in your pocket and pull out hard cash it makes you think.

I had the same issue with Am Exp.  They went up on my interest rate which push me up over the limit.   I called them to try to get the rate reduced but they said that I went over the limit so they could not help me.  The government needs to look into these kind of acts from the credit card companies just as they are with the mortgage lenders.

VA Mother of 2 I concur there was a foreclosed home in our area in the midst of refinancing our home. The mortgage company told us we could not refinance because we were now upside down in a house we had lived in for three years. The caveat of this is when they told us that if we were in financial trouble they could possible help, seems absurd to ask a potential client for refinancing to be in a hardship in order to receive help. Currently there is nothing we can do with kids and a parent living with us but weather the storm. I worked for AmEx for quite a while and I know that these decesions are based on fear more than risk management. Anyone who has engaged in risk management knows it's only about probability and no one can truly access human behavior during a crisis. It's sad that those of us who have always strived to do what's right like Mr Gieland are finding themselves backed into a tight corner. This is not the America I grew up knowing and not the one I'm willing to leave to my kids. Unscrupulos mortgage schemes and no one in congress is even dealing with the challenges that "we the people" have to deal with everyday is ridiculous. What does one do when a line of credit is cut or cancelled and it effects your FICO score? That's not the signal you would want to send to other potential creditors which only exaggerates the existing credit crisis.

well VA mother.......sounds to me like you are leading a fairly privilaged life...........but by all means, let's give you something because you dont think it's fair.  

I do agree that these people who decided to live outside their means shouldn't be getting breaks though either though.

and in reguard to that credit limit vs how much you use.......i wouldn't strongly recomend that YOU ask them to lower it a bit.....yet, you say you would cancel if they reduced from that 23k........

The more unused credit you have gives you a better score. Better score lets you get a better rate with a different card.  I have gotten several cards over the years with the 0% intro rate for a year (sound like the ARM problem). Aways paid off or transfered to new 0% card. I have tons of unused credit, keep getting the offers.  Lowering you credit limit is not necessarily the right thing to do.

I Totally agree Jerry. No notice, just totally embarrassed when my card didn't go through. I thought I understood there explaination, but after reading this article, it really makes sense. Once I get through this month I won't need them anyway.

Did they even think about people paying what they owe, now that they have to use there capital to sustain there business? I'll survive, BUT will they?

I haven't used AmEX since they cut off my gold card in the middle of a Carribbean cruise.  I had always paid the balance each month and had been a cardmember for years, but there I was on a big ship at sea and suddenly I couldn't pay for any onboard expenses.  Faced with paying $40/min for a ship-to-shore call to find out what was going on, I switched to a VISA card that luckily I had with me.  When I got home, their reasoning was I didn't call them in advance and "inform" them of my vacation plans!!  Talk about big brother!!  I told them what they could do with it and have never used one since.

Problem is if you force them under they will probably be the next giant useless company to benefit from taxpayers, im sorry i mean government funds!

It seems that most of you are on the wrong AMEX product.  The OPEN (small business) card is basically a personal card (tied to your personal credit).  You need to switch to the corporate platform.  Your limit is tied to your business financials as opposed to your personal financials, nor is it reported on your credit report.

Before you bash AMEX, make sure you are on the right product.  It makes a HUGE difference! 

Of course they are in trouble, but I'll bet the executives are walking with millions.

Guess what, guy. If people are fulfilling their obligation, there is no justification what-so-ever for taking them to the cleaners. When will Americans stop allowing the greedy finance companies to use any method to bleed our country to the death?

DocChuck, I think you should move to a retired home with the other old retarded junkies...if one pays their bills and their required minimum or more than the minimum Amex is charging a premium interest for using their money..is'nt that what they are offering as a product...so as long as you are pay on time...Amex is just going crazee and don't want to take any effort to look into the person's credit history with them.

Everyone seems to have forgotten, a lot of people were living within their means

and gas prices went through the roof and wrecked our economy way before

this mess. A lot of people had the rug pulled right from under them,

lost their jobs and at the same time utilities, food and gas prices skyrocked.

Not all forclosures are from who people had mortgages they could not afford.

It's hard to afford any mortgage with no job.

And as for credit limits, If you can't afford important things like car repairs,

Of course you would not want your credit limit reduced.

You could pay off the bill on a budget.

And it could actually keep you living within your means

Versus financing a car.

I got the same impression.

If you are in a sole proprietor business several years and still using a card for capital expenditures without paying them off on time, there is a severe problem here, especially if you are in his business (the cost of occasional software updates and hardware).

The comment about "burning through" $6,000-8,000 for travel is also bothersome, given that he rents from the most expensive car rental vendors.  It doesn't say much for running a "lean and mean" business, and also demonstrates a certain arrogance.

From the picture, he might also knock off the 3 martini lunches as well.