Hey everyone,
well, we just got a slice of reality today. Found out that our AmEx limit has been reduced in half.

We pay off all our credit cards each month, we have excellent credit scores, make a decent income, and own our home. So why would our limit be reduced?

According to the AmEx rep, a significant portion of their card users are having their limits reduced because AmEx just doesn't have enough money to manage as much debt anymore.

Holy Crap.

Mrs. K

That's a good thing.

Unless you can't afford to maintain your lifestyle with your current income.

I have a single credit card with zero balance. I only own it in case my roof falls in or my basement floods or my car explodes while I'm 500 miles from home. Otherwise, I pay cash for everything I buy. But I can see how that would be a good thing for 60% of cardholders, to reduce their credit limits so they don't do desperate things if they hit an economic rough patch, and end up defaulting.

But as far as just an FYI, as I think you intended this to be, I hear you.

Has anybody in this area had their HELOC frozen or reduced?


http://www.smartmoney.com/spending/deals/credit-line-decreases-catch-consumers-unaware-21594/

We don't have a HELOC, but I've heard that folks are having theirs reduced.

As for us, because of how Mr. K's paychecks work out, we use credit cards for purchases, then pay them off at the end of the month, so we pay no interest. We wonder if our limit would have been cut if we had kept a balance. Mr. K asked the AmEx rep about that, and he said it wouldn't have mattered, AmEx was cutting hundreds of thousands of customers' limits.

I doubt you'll have much problem getting a different card with higher limits if you have excellent credit. I've never cared for Amex anyway since having some problems with their fraud protection.

Mrs. K Wrote:
-------------------------------------------------------
> We don't have a HELOC, but I've heard that folks
> are having theirs reduced.
>
> As for us, because of how Mr. K's paychecks work
> out, we use credit cards for purchases, then pay
> them off at the end of the month, so we pay no
> interest. We wonder if our limit would have been
> cut if we had kept a balance. Mr. K asked the AmEx
> rep about that, and he said it wouldn't have
> mattered, AmEx was cutting hundreds of thousands
> of customers' limits.

The problem with lowering limits to current balance is that doing so will lower your credit score... your ratio of debt to available credit is closer to 1.0. It may be harder to obtain a new card with higher limits. If you don't carry a balance then the ratio of zero to some number remains zero. But a lowering of available credit may change the FICO by a couple of points.

But this is for the benefit of protecting the banks. They need to reduce their exposure to consumer credit defaults going into whatever degree of recession we are. This is one case where people who use credit responsibly could care less.

It will be interesting seeing society move back to the notion of not buying stuff you don't have money for or can't afford.

HELOC's are being frozen or reduced because as home values plummet, the home equity collateral is dissapearing. As people begin to owe more than the house is currently worth, HELOC's aren't possible because there is no equity.

Apparently AMEX is the only card company doing this. I haven't heard of VISA or Mastercard doing it.

While I personally would never max out a credit card, many small businesses rely on AMEX to help with monthly liquidity. While I understand why AMEX is doing this, I think it could ultimately hurt their small business unit.

You wouldn't hear about VISA or MC doing it... they are transaction processors and don't actually extend credit. Other banks use V/MC to extend credit. You'd hear about Chase or US Bank or Cap One doing it, not VISA/MC. AMEX, on the other hand, extends credit directly in addition to transaction processing.

Here is a blog post from someone saying Amex lowered their credit limit to balance owed, but it was posted in Feb of this year so apparently the practice has been going on for some time now.

http://www.totalnoid.com/2008/02/24/recession-is-forcing-american-express-to-reduce-credit-lines-for-no-reason/



Edited 1 time(s). Last edit at 10/25/2008 08:31PM by pgens.

http://www.nytimes.com/2008/10/29/business/29credit.html?_r=1&hp&oref=slogin