American Express is getting tough on credit card holders in light of the ongoing economic downturn, according to a report by MSNBC.
Apparently the credit card issuer is now factoring in where cardholders make purchases and where they got their mortgage, along with a number of other factors previously used to weigh credit risk.
One customer had two of his credit cards closed and one remaining credit line slashed for these reasons, as evidenced by a letter he received from American Express.
He noted that the reduction in available credit could force him to close his computer consulting firm.
American Express is also reportedly looking at where cardholders live (if it’s a foreclosure hot spot) in determining whether their credit limit should be reduced or cut entirely.
While these factors have long been rumored, this is the first time a credit card issuer has been so transparent about it all.
An American Express spokesperson, who confirmed the news, said in recent years about 80 percent of cardholders saw their limits increased in a given year, while the remaining 20 percent saw a reduction.
But nowadays, that ratio is closer to the 50-50 range, highlighting the severity of the ensuing credit crunch.
While it comes off as a negative, I personally feel American Express is being proactive while other card issuers may not be doing their due diligence.
Sure it’s unfortunate that some cardholders will lose available credit, but if American Express and other card issuers were to become insolvent, the credit dislocation would be far more drastic for many more Americans.