AMEX Letter

dazzaofdagenham

I received a similar letter about increasing my interest rates….just had a small calculation and worked out I’ve paid 24.36 in interest and foreign fees in the last 36 months.

so am I to assume they are increasing my interest rate because there may be a possibility I may be unable to pay in the future?….if so…I get and understand that.

however not a week later I also get a letter from Amex increasing my credit limit by about 40%…

are they encouraging me into debt ?

[Deleted User]

aris said:

Article in Telegraph about this (sorry may be behind paywall)

https://www.telegraph.co.uk/personal-banking/credit-cards/american-express-cut-borrowing-limit-hiked-rate-despite-improving/

as I previously suspected a barclaycard type exercise, havent had my credit limit slashed yet, although its only £1000 anyway.

MoJoeGo

I've not got a letter. I'm feeling left out. Who do I complain to...?

[Deleted User]

Deleted_User said:

Deleted_User said:

Deleted_User said:

MoJoeGo said:

Sandtree said:

MoJoeGo said:

It's a bit of an odd one isn't it.

Not really when you remember that banks, insurers etc have to model disaster scenarios to calculate how much capital they are required to hold to ensure events don't cause them to go bust.  Even if it has no impact on you in normal scenarios that isnt to say it won't reduce the capital they need to hold against certain risks. 

That would certainly make sense in the context of reducing limits. But I'm not sure how raising rates, for a card whose user base would not typically be paying interest, would have any material impact on Amex's reg cap requirements.

I have a paypal credit account that had a limit of 3650 last march, when i logged in all of a sudden the limit was reduced to 2650 which was the balance, immidiately rang paypal and asked the reason for it and they said it was because I wasent "using" the rest of the available credit so they felt I didnt need it and decided to reduce it. 

I dont know about anyone else but surely not maxing out your credit accounts to the limit is a good thing and would suggest a lesser risk ? 

The recent credit limit cuts with barclaycard suggest a knee jerk reaction by the lenders in order to reel in residual capital, rather than anything to do with the customer concerned being a "risk"as such, the only thing which would suggest a customer being a lending risk is if they have defaults, missed payments ect with the provider concerned or with other lenders.

Financial hardship and responsible lending rules are very much a focus for banks as instructed by the FCA
If you were carrying a balance rather than paying it off it's logical for them to stop you spending more to avoid running up more debt

If that was the case then banks simply wouldnt lend anyone money, that would make lending unprofitable.

Someone who pays in full every month is not profitable, the whole intention is that they dont.

Providers like Amex and the card issuer charge merchant fees on any credit card payment - they make profit from you even if you pay off in full every month. This is a well known urban myth. Lenders certainly also make money from interest but it's factually incorrect to state someone who pays in full isn't profitable.

[Deleted User]

Deleted_User said:

Sandtree said:

Deleted_User said:
Someone who pays in full every month is not profitable, the whole intention is that they dont. 

If that were the case please explain the American Express Blue Card? Its a charge card so has to be paid off in full each month and it has no annual fee https://www.americanexpress.com/uk/charge-cards/basic-card

Its a fiction that its not profitable to have customers paying off the balance in full each month... its just more profitable if they let it roll over.

I think you missed the point, the other poster suggested that a customers credit limit would be reduced on a non amex facility because they didnt pay it in full, thats not even remotely realistic.

Anyway in general I believe that lenders should only reduce credit limits if there is solid evidence of financial mismanagement for example late payments, missed payments ect, doing so willy nilly because the computer has decided that person "may" become a problem can have serious consequences, for example if someone unexpectedly has their overdraft pulled from under their feet, they may not be able to feed themselves of their children and then be placed in financial hardship as a result, and their credit score ruined if direct debits bounce.

The whole point of reducing credit limits should be to protect the consumer from excess unaffordable borrowing if they cannot meet exsisting commitments, if they can then reducing credit facilities is not justified and im some cases can actually make the problem worse.

Someone who has temporary financial difficulties may need to borrow more to tide themselves over until they can get back on top of things, if that person does not have any previous history of defaulting on credit agreements then its very unlikely that they will on any new ones they take out, so its fundimentally wrong that some credit risk system decides to naughty step them as a result. 

Except it is completely realistic - it's happening currently (just look at the Barclarycard limit reduction thread). You may think otherwise but FCA rules on persistent debt allow this.

What you believe lenders should do is your opinion but doesn't reflect the commercial decisions.

The point of reducing credit limit is to stop the person running up more debt, accruing more interest etc. Credit card debt is an expensive loan, in effect, it helps the customer reduce their problems if they can't keep adding to it. Banks have been contacting people in persistent debt problems (those paying the minimum every month where the interest payments take up the bulk of the funds paid) to up their minimum payments or even freeze the card to stop spending.

Borrowing to pay debt is not a solution. Your opinion may well be that it's wrong but the fact is that the FCA etc are there to stop people running up impossible debt.

[Deleted User]

Deleted_User said:

Sandtree said:

Deleted_User said:

Sandtree said:

Deleted_User said:
Someone who pays in full every month is not profitable, the whole intention is that they dont. 

If that were the case please explain the American Express Blue Card? Its a charge card so has to be paid off in full each month and it has no annual fee https://www.americanexpress.com/uk/charge-cards/basic-card

Its a fiction that its not profitable to have customers paying off the balance in full each month... its just more profitable if they let it roll over.

I think you missed the point, the other poster suggested that a customers credit limit would be reduced on a non amex facility because they didnt pay it in full, thats not even remotely realistic.

Anyway in general I believe that lenders should only reduce credit limits if there is solid evidence of financial mismanagement for example late payments, missed payments ect, doing so willy nilly because the computer has decided that person "may" become a problem can have serious consequences, for example if someone unexpectedly has their overdraft pulled from under their feet, they may not be able to feed themselves of their children and then be placed in financial hardship as a result, and their credit score ruined if direct debits bounce.

The whole point of reducing credit limits should be to protect the consumer from excess unaffordable borrowing if they cannot meet exsisting commitments, if they can then reducing credit facilities is not justified and im some cases can actually make the problem worse.

And your first point I didn't have an issue with or comment hence didn't quote it… just you then went on to repeat the urban myth that paying in full each month is unprofitable.

The problem is that you are complaining about the wrong people… its the FCA that is driving this whole "persistent debt", affordable lending things etc. Its similar with the FCA now saying renewal of insurance cannot be higher than new business price… all designed to protect the vulnerable minority but consequently negatively impacts others.

As to pulling a line of revolving credit causing someone to not to be able to afford to feed their children… that seems a perfect example of someone in financial difficulty even before the overdraft being cut

No its not, financial difficulties can be temporary and hence why overdrafts are there, someone who has never used their overdrafts in the past all of a sudden gets the facility removed, could be put in a very unfair position.

Also people should not be deamonised by not paying in full each month. Not all of us have the luxury of having loads of spare cash.

Overdraft is in effect an authorised temporary loan, if your spending is greater than your income, that is the problem. People who can't pay in full aren't being demonised but rather helped to stop them getting into worse debt

ThisnotThat

Deleted_User said:

Sandtree said:

Deleted_User said:
Someone who pays in full every month is not profitable, the whole intention is that they dont. 

If that were the case please explain the American Express Blue Card? Its a charge card so has to be paid off in full each month and it has no annual fee https://www.americanexpress.com/uk/charge-cards/basic-card

Its a fiction that its not profitable to have customers paying off the balance in full each month... its just more profitable if they let it roll over.

I think you missed the point, the other poster suggested that a customers credit limit would be reduced on a non amex facility because they didnt pay it in full, thats not even remotely realistic.

Anyway in general I believe that lenders should only reduce credit limits if there is solid evidence of financial mismanagement for example late payments, missed payments ect, doing so willy nilly because the computer has decided that person "may" become a problem can have serious consequences, for example if someone unexpectedly has their overdraft pulled from under their feet, they may not be able to feed themselves of their children and then be placed in financial hardship as a result, and their credit score ruined if direct debits bounce.

The whole point of reducing credit limits should be to protect the consumer from excess unaffordable borrowing if they cannot meet exsisting commitments, if they can then reducing credit facilities is not justified and im some cases can actually make the problem worse.

Someone who has temporary financial difficulties may need to borrow more to tide themselves over until they can get back on top of things, if that person does not have any previous history of defaulting on credit agreements then its very unlikely that they will on any new ones they take out, so its fundimentally wrong that some credit risk system decides to naughty step them as a result. 

So it's "won't someone please think of the children?"

They're placed in financial difficulty because they have no savings in place to cover emergencies, not because a bank decided to stop lending to them.  Credit is a privilege, not a right, and you certainly should not be reliant on it.

Banks are damned if they do, damned if they don't.  People get into a debt spiral and it's "I can't believe the banks are so irresponsible lending money to people like this and how dare they charge interest for it" and if they pull overdrafts/credit limits they get demonised for "putting people in financial hardship."  You can't make it up.

aris

Deleted_User said:

Deleted_User said:

Deleted_User said:

Deleted_User said:

MoJoeGo said:

Sandtree said:

MoJoeGo said:

It's a bit of an odd one isn't it.

Not really when you remember that banks, insurers etc have to model disaster scenarios to calculate how much capital they are required to hold to ensure events don't cause them to go bust.  Even if it has no impact on you in normal scenarios that isnt to say it won't reduce the capital they need to hold against certain risks. 

That would certainly make sense in the context of reducing limits. But I'm not sure how raising rates, for a card whose user base would not typically be paying interest, would have any material impact on Amex's reg cap requirements.

I have a paypal credit account that had a limit of 3650 last march, when i logged in all of a sudden the limit was reduced to 2650 which was the balance, immidiately rang paypal and asked the reason for it and they said it was because I wasent "using" the rest of the available credit so they felt I didnt need it and decided to reduce it. 

I dont know about anyone else but surely not maxing out your credit accounts to the limit is a good thing and would suggest a lesser risk ? 

The recent credit limit cuts with barclaycard suggest a knee jerk reaction by the lenders in order to reel in residual capital, rather than anything to do with the customer concerned being a "risk"as such, the only thing which would suggest a customer being a lending risk is if they have defaults, missed payments ect with the provider concerned or with other lenders.

Financial hardship and responsible lending rules are very much a focus for banks as instructed by the FCA
If you were carrying a balance rather than paying it off it's logical for them to stop you spending more to avoid running up more debt

If that was the case then banks simply wouldnt lend anyone money, that would make lending unprofitable.

Someone who pays in full every month is not profitable, the whole intention is that they dont.

Providers like Amex and the card issuer charge merchant fees on any credit card payment - they make profit from you even if you pay off in full every month. This is a well known urban myth. Lenders certainly also make money from interest but it's factually incorrect to state someone who pays in full isn't profitable.

I suppose it depends on the card.  Tandem bank decided to drop their cashback card due to too many customers paying in full every month.  I've never paid a penny in interest on any card ever - i go for cashback if at all possible.  So it is Amex for me - and Aqua (MasterCard) if Amex is not accepted.  Somehow Amex seemed to make money by offering 1.25% cashback (now 1% I recall) - i've not received a letter from them - in fact they have recently increased my credit limit.  Perhaps because I charge everything I possibly can to my card to get the cashback (money for nothing).

born_again

Deleted_User said

Someone who has temporary financial difficulties may need to borrow more to tide themselves over until they can get back on top of things, if that person does not have any previous history of defaulting on credit agreements then its very unlikely that they will on any new ones they take out, so its fundimentally wrong that some credit risk system decides to naughty step them as a result. 

In that case they should be talking to their bank about the situation. Who will look at it and help them. Contrary to what many people think. A bank is more than happy to help, if they know someone is trying their best & not just digging a even bigger hole that means they will never pay anything back.
Simply borrowing more money is not the answer.
It is why so many people get into such a mess. As that temporary often becomes permanent due to the larger debt.

[Deleted User]

aris said:

Deleted_User said:

Deleted_User said:

Deleted_User said:

Deleted_User said:

MoJoeGo said:

Sandtree said:

MoJoeGo said:

It's a bit of an odd one isn't it.

Not really when you remember that banks, insurers etc have to model disaster scenarios to calculate how much capital they are required to hold to ensure events don't cause them to go bust.  Even if it has no impact on you in normal scenarios that isnt to say it won't reduce the capital they need to hold against certain risks. 

That would certainly make sense in the context of reducing limits. But I'm not sure how raising rates, for a card whose user base would not typically be paying interest, would have any material impact on Amex's reg cap requirements.

I have a paypal credit account that had a limit of 3650 last march, when i logged in all of a sudden the limit was reduced to 2650 which was the balance, immidiately rang paypal and asked the reason for it and they said it was because I wasent "using" the rest of the available credit so they felt I didnt need it and decided to reduce it. 

I dont know about anyone else but surely not maxing out your credit accounts to the limit is a good thing and would suggest a lesser risk ? 

The recent credit limit cuts with barclaycard suggest a knee jerk reaction by the lenders in order to reel in residual capital, rather than anything to do with the customer concerned being a "risk"as such, the only thing which would suggest a customer being a lending risk is if they have defaults, missed payments ect with the provider concerned or with other lenders.

Financial hardship and responsible lending rules are very much a focus for banks as instructed by the FCA
If you were carrying a balance rather than paying it off it's logical for them to stop you spending more to avoid running up more debt

If that was the case then banks simply wouldnt lend anyone money, that would make lending unprofitable.

Someone who pays in full every month is not profitable, the whole intention is that they dont.

Providers like Amex and the card issuer charge merchant fees on any credit card payment - they make profit from you even if you pay off in full every month. This is a well known urban myth. Lenders certainly also make money from interest but it's factually incorrect to state someone who pays in full isn't profitable.

I suppose it depends on the card.  Tandem bank decided to drop their cashback card due to too many customers paying in full every month.  I've never paid a penny in interest on any card ever - i go for cashback if at all possible.  So it is Amex for me - and Aqua (MasterCard) if Amex is not accepted.  Somehow Amex seemed to make money by offering 1.25% cashback (now 1% I recall) - i've not received a letter from them - in fact they have recently increased my credit limit.  Perhaps because I charge everything I possibly can to my card to get the cashback (money for nothing).

The cashback ones were dropped because of the cap on interchange fees (at 0.3%) from the EU not because people were paying in full - they were previously as high as 1.5% in some transactions. Once the cap came in place in 2015 multiple lenders did it - RBS scrapped "Your Points", Capital One cut / removed cashback and Avios/Nectar both reduced benefits etc.

Amex charge higher fees (hence why some people don't accept them) and aren't capped like Mastercard and Visa