American Express lowers customer’s credit limit because they barely used their credit card: Money Matters
Question: My wife and I have an American Express account, and the company recently reduced my credit limit because I wasn’t using enough. I spent two or three months with minimal use; I usually only charge a few hundred dollars a month and pay it off right away.
But American Express just lowered my huge credit limit because I wasn’t using enough. My credit score is over 800 and has been for years, so I don’t pay much attention to credit and the like.
My question is why American Express would bother to do this? What do they gain from lowering my credit limit? Ironically, when I got the letter from them, I had just made a big one-time charge (a wedding!) That brought me closer to the new credit limit. It didn’t seem to change their minds. I really don’t care. The new limit is OK. Just curious.
A: Wondering why American Express would lower your limit and what they have to gain? They can make more money by freeing up the amount you have – that you don’t use – and making it available to someone else who would use it and generate income for American Express.
Credit card companies cannot have infinite credit limits for everyone, although it can sometimes seem that way. It would be a risky business practice. Even if you weren’t using much of your line of credit, they should assume that you could anytime, just like you were paying for a wedding.
But if you barely use your limit most of the time, they’ll give your available credit to others with whom they can make money through merchant fees and possibly finance fees.
You mentioned that you have a credit score over 800. That’s fine. You can definitely qualify for any credit card at any time. But I wouldn’t close this AmEx account unless you plan to never use it and it would be annoying to check if anything was wrong. Closing the account might affect your score a bit, especially if you have had this account for many, many years.
Question: I have a question about your article last month on banks sending paper checks to customers who use online bill payment. I asked my local Huntington Bank teller for their hidden account numbers and she never heard of them. I called their main office and the rep put me on hold so I kind of knew my answer, and when she came back she said they don’t offer it and don’t know when they do. will.
A: As I said in the story, Huntington does NOT reveal a customer’s account number when sending checks through online bill payment. Most of our local banks don’t; a few do.
Turns out you thought I was talking about the regular personal checks most of us write. But your question is not too far from the base! There has been talk in banking circles of having regular personal checks that somehow do not contain our actual account number. It can work the same as virtual credit card numbers which allow you to pay for things online without using your real account number.
Huntington is one of the local banks that obscures a customer’s account number on paper checks issued through online bill payment. Banks send payments electronically about 80% of the time and by check the remaining 20% when they cannot be sent electronically.
Key, Citizens, and Chase also mask the customer number on online paychecks. PNC, Fifth Third, and US Bank are some of the local banks that use a customer’s actual account number, as would happen if the person sent one of their personal checks.
You can check what your bank is doing if you’ve used the bank’s online bill payment service before and a paper check has been issued. When the check is cleared, it will either display your account number at the bottom or another number corresponding to the bank’s internal settlement account.