Companies cancel cards of responsible customers

Why do bad things happen to good people? This question has been one of the most difficult questions in theology throughout history.  I say this not to draw parallels between credit card companies and God, but without the proper regulation in place, capricious companies will continue to operate in omnipotent ways.  Meanwhile, fatalistic customers can only submit to the wayward will of profit-seeking companies.  I suppose you could call it the credit crucifixion instead of the credit crunch. 

The days of companies rewarding responsibility are over.  In their latest efforts to minimize risk and maximize customer pain, credit card companies are canceling accounts of those who don’t use their cards often or at all. Some of the targets are “transactors” and “freeloaders”, those who pay their balances in full every month.  Others are customers who prefer to have credit cards for emergencies only, and therefore hoard cards with zero balances in the bottom of a drawer somewhere.  They make companies hardly any money and all that available credit is dead weight

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Most of the major companies are slashing and burning.  Discover closed three million accounts during 2008 due to inactivity according to SmartMoney.com.  Likewise, Capital One says it is suspending accounts that have been inactive for at least a year.  Recently, I received a letter from HSBC informing me that it canceled an inactive and zero-balance account I had for my business.  American Express has been doing the same. 

So, there isn’t much customers can do in the short term except play by the new rules.  To escape the wrath of the credit card companies, make sure you use any cards that have been dormant for awhile.  Don’t spend too much by staying under seven percent of the card’s limit. Make sure you don’t carry a balance as well.  By doing this, you will make the company some money for interchange fees and in so doing gain divine favor.  And for those who have been using their card responsibly every so often, hope and pray that you are not next on the death list.  Actually, we should all hope and pray because not even these steps are a guarantee to eternal, credit card life. 

To learn more about this topic, read the SmartMoney.com article. 

Comments

[George]

I discovered this morning that USAA, my bank for 20-years, cancelled my credit card without notice - even though I paid off half of my credit card balance last month. They claim that they don't know why it was cancelled -that it "was done automatically by their computers" . They told me I could "reapply for a new card, once I pay off the remaining balance". My interest rate on my card was 12.5% -my new rate would be 24% -29%. Somehow I don't think this was a computer error. I told them they could "Stick their card up their a$$, and that i was going to be closing all of my personal and business accounts." Again, I have been with this bank for 20-years. Obviously, customer loyalty no longer means a thing. One last thought, I wonder if our dip-shit Congressional Reps -such as Chris Dodd -the friend of the bankers - has had their cards cancelled without notice?

[Elizabeth]

I got a notice today from Capital One that they are closing my account for not using it......I've been with this bank for many years. What will people do if they don't have emergency cash? I like everyone else have paid my bills and have a terrific FICO score,this is awful.
Suze Orman warned us about this happening. I expect it to be a Domino affect by or before 2010

[Lea]

I have the same story. Always have been in good standing with Chase Visa and they just closed one account and lowered the available credit on the other. My question is, is there anyone out there fighting this? This is ruining people's lives. We live and die by our FICO score. I was just about to start a small business. The trickle effect from this is enourmous. Not only will it restrict me from starting a business, but it will also affect the people who I was going to contract with, and the people they were going to contract with, and so on. This is an irrisponsible disreguard on the part of the credit card companies. Isn't there anything that can be done? A class Action Lawsuit? I'm not one for believing in suing. BUT I just think this is a case where something has to be done to stop this before more people's lives are ruined.

[Arnold Connor]

Had BofA refuse me a credit card because "my history was not sufficiently long". I have a 750+ credit score, no debt, bank with BofA and had a $21k credit card with them as recently as last year. Checked my free credit reports, have a clean history going back 20 years. Never been late on anything, ever.

There must be some massive losses coming down the pipe for them in order to be so desperate to reduce their outstanding lines of credit. Don't know how much of a better customer than me they can find.

I took it as a sign that maybe now is good time to move my checking account to the local credit union, something I had been putting off for years. Ultimately, having the good customers desert them for other banks will put the nail in their coffin, which is as it should be.

If you have savings/checking/brokerage accounts with these banks, move them to a credit union or other bank.

[Chris]

I just can't win.

I pay my bills on time. Yes i carry a balance due to the recession and its affects on me.

I get mail this week: Discover closes my 14K credit limit card that I've had since 1991. Inactivity they say.

I get mail this week: Amex is lowering my limit -- taking all my available credit away.

The downside to their actions? My available credit has been cut from estimated 80% available to 10%. I can only imagine the related plunge in credit scores.

I can't do anything. Powerless.

Discover says you can open a new one, can't reactivate the old one.

This really sucks.

[Jim]

This site is very informative Kevin...Kudos to you.
Two CC companies have done the same to me, Advanta has closed my Business account and HSBC has lowered my limit from 15,500 to 1,000....This will affect my credit score significantly. I am sure of that, Probably to the level close to as if I had claimed bankruptcy. It was in the 740 range...Companies that do this should be forced to pay damages and put out of business.. Maybe everyone should join together and not pay them.Consumers should not be held resonsible for their poor business decisions. The credit beaureu's should be helping to control this so the responsible consumer scores are not affected.

[Alessandro Machi]

It will be nice to keep building a coalition of people who are really serious about reversing what Chase has started recently.

Check out my website at http://www.Daily-Protest.com

[mike g]

I received emails this week from American Express notifying me that my credit limit had been reduced from a combined $30,000 to $2,000. I immdeiately chcked my credit reports where I found my FICO score in tact at 785. I called Amex who told me it was because of my debt level. My debt to income ration is .21. Not sure what kind of customer Amex is keeping but good luck staying in business.

[Janell]

I have been trying to rebuild my credit from a bankruptcy in 2001. i have gotten my FICO score in the high 700's due to my hard work. All of that was never being late on any payments and having 3 cards - Visa, Discover and Mastercard. The Discover card I charged and paid off every month. The other 2 were my emergency cards. I was paying my Discover bill online and "discovered" that they cut my credit limit from $5000 to $340 due to a "business decision". They claimed they mailed me a letter 10 days in advance (it was probably one of the 4x6 cards that you lose in between the junk mail). I just received a letter from my Mastercard that they were closing my account due to inactivity for 6 months. I called the customer service rep and all she could do was read from a script. After asking for a manager, she also said sorry, there was nothing they could do. I asked how that would be listed on my credit report. Her response was "you would need to call all 3 of the credit bureaus and ask them - we would not be able to give you an answer". I asked her why I should be the one wasting hours of time to call them - they should have the answer for the cardholder. I know I am among the millions of Americans who have suffered this kind of trickery and downright awful treatment of a great paying cardmember, but what am I supposed to do with only $340 of credit to my name? What if I am laid off, something happens to my car, etc? My safety net is literally gone! I am a 1 income household - I have no other income but my FT job. I make a decent living and am scared of what lies ahead. The other way we get screwed is the more credit apps you fill out, the worse it looks on your credit report. If anyone has any suggestions, feel free to share.

[Marie]

I too have fallen victim to reduced credit limits and higher interest rates despite my 770 credit score. My goal now is to pay them all off and be done with them. The credit card companies are losing their bad customers because they are defaulting. Now, to make up for the loss, they are sticking it to and alienating their good customers. It won't be long before they have no customers. It must be a profitable business or they would not have been doing it. How will they survive with NO customers? I just don't get it.

[Chrizzie]

AmEx just cancelled my platinum card that I barely use and when I do, I pay it down immediately. They quoted "high balance" ratio. Hmm.....I have a 6 figure income and only care $2000 in revolving credit, which I pay down most every month. Thanks for the damage you will do to my FICO score AmEx....

[arizona Bill]

When I think about this shady action by the credit card companies, I think about a class action suit against them.I consider my FICO score to be an asset and if they damage it they should pay the price. What do you think?

Smart money.com has nailed the issue.

For consumers, however, account closings can be devastating -- especially to their credit score. Your credit utilization ratio -- the amount of your debt in relation to the amount of your available credit -- comprises 30% of your score, says Craig Watts, a spokesman for Fair Isaac Corporation (FIC), the company that calculates and issues the FICO credit score that most lenders use. So when an account is closed, you have less credit available to you -- and the ratio immediately jumps higher. A person with a solid credit score of 720 or so, whose utilization ratio jumps from 35% to 75% after one of their accounts is closed is likely see their score drop by "several dozen points," to somewhere in the 600s, he says. That's a far cry from the 760 (or higher) consumers need to get the best rates from lenders.
Do we have any lawyers out there that might help the cause? It is time to fight back.

[Linda]

The more and more I read on this site, the more I think to myself...let's ditch the credit card companies. We are the ones to butter their bread, you treat your customers bad, you ain't got no customers. Then they won't have to spend all of their time trying to rid themselves of us folks who pay on time, we will be gone and so will they.

[Tara Goldberg]

Thanks, Kevin. I just heard you on the Oprah & Friends radio show. This site is excellent, well-written, informative, and inspiring. I will definitely share with all my friends.

[christopher]

It seems as if we just can't win. I have been a "responsible" customer for years, paying my bills on time and making sure I don't do anything to anger my credit card company. What do they do? They lower my limit to the point where I have no more available credit. That is just low and dirty. I was able to make a payment to get it down but the fact that they could do that without me knowing makes me angry. We should just top patronizing these businesses and let them fail!