Credit Card question

[Houlie24x]

I have had an American Express credit card for about 2.5 - 3 years. I have never made a payment late and usually pay off the balance the following month. My credit limit was up to $6,000 at one point, but I put a semester of tuition on it for two weeks or so and the next month they dropped my limit down to $2,000. They said my debt-credit ratio was too high. As of right now, my limit is still currently at $2,000. My first question is why they allow me to have a credit limit that high if they are going to allow me to use it all? Were they just trying to screw me over?

 

A couple days ago, I got a letter in the mail from American Express and they said they were going to raise my APR to 28.24%. I don't remember what it was prior to that, but I think it was somewhere around 11%. The reason for this is that they had a check returned.

 

The check I wrote them was returned because my bank locked my account because someone bounced a $3,600 check on me. The person who wrote the check added sufficient funds a couple hours after I cashed the check according to the person I talked to on the phone. She wouldn't tell me that directly, but her exact words were, "The check was ISF when the check was cashed, and a couple hours later the account had the money available. Use your imagination to figure out what happened." They however didn't correct this error for ten days when it could have been taken care of in one day, and all of my money in the account was locked, not just the $3,600 that the check was for. I was not aware of the fact that my account was locked in the first place or that they locked all my money. I also called them about a dozen times trying to get this figured out once I did realize my account was locked, but it seemed like nobody knew why it was locked, and they just kept giving me different numbers to call. There was also two times where they told me the account would be unlocked the following day and didn't happen.

 

I got a call from someone from American Express sometime during this 10 day period when my account was locked and they notified me that my check did not clear. I resubmitted the payment and they told me that it would go through before the payment due date and that there would be no penalty for this. As you can see I ended up getting my interest rate bumped up, and they also gave me a pretty big fine.

 

Is there anything I can do about this? I plan on paying the card off and will never use this card again because of the outrageous interest rate. Would it be a bad idea to close the account? I know it will initially hurt my credit score, but will it hurt it long term? I have another card with a $1,500 limit and another with $500 that I don't use. My biggest concern is that I don't hurt my credit score, but they do give me a periodic finance charge if I don't use the card. Am I just going to have to suck it up charge gas to it once in a while to avoid the periodic charge?

 

As for my bank (Guaranty Bank), Is it normal for a bank to lock an account when I was the one receiving the bad check? I can understand them freezing the $3,600, but not the whole account. Plus like I said before, it took them ten days to fix something that should have been done in one. Is there anything I can do to recoup some of these fines I racked up? I had to pay fines for three different returned checks in addition to the interest rate being increased on the AE card plus it was pretty embarrassing having checks returned or my debit card denied at a store. I wrote the checks prior to depositing the check that was ISF and I had sufficient funds in the account to cover the amounts otherwise.

 

My main concern is what I should do with the credit card. Any advice would be appreciated.

[igor67]

In my experience as a collector they likely put a hold on your account as they were investigating it for fraud potential. The large deposit bounced check is a type of scam people try to run.

 

I'd make the decision on how much you needed that credit card, possibly get another one first, and if you can take the hit give them up a call and say this is the free market calling you corporate fool I'm taking my business elsewhere.

[craigharmann]

Cut it up. Don't use it. Buy things that you can pay only cash for. My wife and I haven't used a credit card for the last year + and we haven't shriveled up yet. The only other loan in life we're planning on taking out is for a mortgage.

[ewizabeff]

Did American Express specifically say the interest rate increase was because of the returned check? Credit card companies are doing a lot of shady stuff in this economy - raising interest rates, adding annual fees to cards, etc. I'd call one more time and say that since you met the payment deadline you don't believe your interest rate should be increased. If they don't give in, close your card (you can still pay it off while it's closed) and use another no-fee, lower interest card. I don't think you should ever have to pay for your credit if you're paying off your bills (interest aside, of course).

 

On a related note, everyone watch your mailbox for "junk mail" from credit card companies. They may be adding fees to your card, hoping you don't notice. link

[Houlie24x]

I pay my card off every month and typically don't use it for anything other than gas. I could just as easily pay cash for that, but I figured this would help my credit score.

 

American Express specifically said in a letter that the interest was going up because of the returned check. If I close the card before the balance is paid off, won't that hurt my credit score? I am definitely paying off the rest of the balance and not using the card again regardless. I just don't know if it's wise to close it for good.

[JJHardy7]

I pay my card off every month and typically don't use it for anything other than gas. I could just as easily pay cash for that, but I figured this would help my credit score.

 

Exactly. There's no problem using a credit card as long as you manage it. If you don't have a credit score due to a lack of credit history and do want a loan, you'll get hit with a high interest rate. I had to build my score after I graduated college since I didn't have much of a credit history. I didn't need a loan, but I noticed my credit score was poor due to a lack of credit history. Having a good credit score can really help your interest rate on a mortgage.

 

Do you know what range your credit score is? I think it might be worthwhile to take a look at it after all these items are on your credit score. I'd maybe think about signing up for something like freecreditreport.com or something similar. It will let you track every item on your score and help you determine if opening up another card would help or hurt your situation.

[FVBrewerFan]

I think you should call American Express and ask for a supervisor. Whoever lowered your credit limit, raised your interest rate, etc. is a desk jockey doing something a flag in their system caught. And anyone you call is a desk jockey sticking to a script. So you need to talk to a live person that can actually make decisions. Explain that you've been a customer for 3 years and have always made payments on time. Then explain your situation. I would simply lay out that you've been a great customer, and want to continue to be a customer but you can't live with these new terms. Be friendly, jsut state the facts. Then leave it in their court to make a decision.

 

No matter what they decide to do, I would leave the account open. If you pay in full every month, it really doesn't matter what the interest rate is. (I have no idea what the APR is on my cards.) Closing out the card would hurt your credit score, and you don't need any more of that. You should also make occasional purchases on any cards you have active, this will help your score. Just be sure to pay them off right away. Finally, see if you can get another credit card. The more credit you're given will help your score. BUT try to find one where you can be pre-approved. Because it may hurt your score if you keep applying for cards and are turned down.

 

Hope that helps. All this is just what I've expereinced, heard, etc. I'm sure there are others here with better tips... Good luck!

[RightFieldCoder]

If you want to leave it open, make sure you charge at least one item to it every 6 months. Clark Howard said (iirc) that it only counts as good credit balancing if you use the card at least twice a year. I did this to a credit card company and had to actually call them several times to tell them to stop raising my limit on the card. I got a card with a different company and don't check the other one often.

[davego]

I'm with Craig on this one. If I only use cash, can't ever have issues with these CC clowns. That said, some of you sound like you have the right idea on how to use them. I did read someplace that a consumer protection group speculates that "people" spend about 30% more when using a card V cash...FWIT.

[Houlie24x]

I just had my credit limit lowered to $500 on this card today. Now I'm really ticked off. I think I'm going to call a supervisor tomorrow and see what they can do. I also didn't know that I should be using my cards every 6 months. Thanks for the advice.

 

I got a credit report this summer. I like to check in on it at least once or twice a year because I had a credit card company do this same thing to me about 4 years ago and I didn't handle it very well which is also why I'm asking for advice on the best way to handle this now. The previous time though, they for some reason gave me a 20k limit on a Chase card and out of the blue dropped it to $500 without warning. I had a little over $500 on the card, I was hit with huge fees, random fines and with interest suddenly my $500 turned into about $1,500 and since I couldn't pay that off in a month it ended up just over $2,000 when all was said and done. I just don't want to go through that again. Chase ended up canceling my card even though I never had a late payment until that last month.

 

I almost feel like canceling all my cards at this point. When I read Craig's comments this morning I completely disagreed, since I just wanted it to build a credit history, but if this can happen at any time maybe it's not worth dealing with. Are there credit card companies out there that are less likely to do this stuff or is it all of them? I've clearly had terrible luck with Chase and American Express.

[mothershipconnection]

I'd maybe think about signing up for something like freecreditreport.com or something similar.

 

Don't go there. Number 1, do not reinforce their ad campaign. Number 2, you have to pay a bunch of money for it, so it's not free. What is free is annualcreditreport.com. You can get your report free once per year there and make disputes. I disputed a bunch of crap on my report that was my ex-wife's and was assigned to her per our divorce agreement. It all comes off my record in 2011, and I can't wait.

[hawing]

What is free is annualcreditreport.com. You can get your report free once per year there and make disputes.

More specifically, you can get one free report per credit bureau per year, so if you plan a bit you can request a different one every 4 months from annualcreditreport.com. Since they're the free versions, you can't see your actual credit score (if I recall correctly), but you can see enough to be able to identify inaccuracies.

[Baldkin]

I worked for quite a few years as a credit card CSR over the phone... so here's my best advice for you:

 

- Be cordial when you call, the first person you talk to will try to help you out with your problem but simply won't be able to, explain it to them, then request to talk to a supervisor.

- If they say that the only reason for the raised interest rate was the returned check, tell them you can have your bank fax them a letter stating that the returned check was not your fault.

- If they refuse to change anything back, Tell them you'll be leaving for another company with a lower interest rate. You can easily do a balance transfer to a new card, and many times they will even give you 0% interest for quite awhile on balance transfers up to a certain amount.

[temke]

If you want to leave it open, make sure you charge at least one item to it every 6 months. Clark Howard said (iirc) that it only counts as good credit balancing if you use the card at least twice a year. I did this to a credit card company and had to actually call them several times to tell them to stop raising my limit on the card. I got a card with a different company and don't check the other one often.

totally correct. dont cancel cards and be sure to use them to keep them active.

 

we have a CC that had an insane limit (5 digits?!?)...which was cut back over the past year for no particular reason (no missed payments, nothing out of the ordinary). i think some of it is the market re-positioning itself. CC companies were letting people borrow left and right and they now see the result of that.

 

FWIW we have 2 CC's and have only carried a balance on them once since 2003.

[dadofandrew]

Banks have pulled back limits in part due to so many people maxing them out before filing bankruptcy (or just ignoring collection attempts). Lawyers would suggest it even, it's as close as you can get to "something for nothing".

[jschris]

I just did a report on credit cards for my supervisor so I figured I'd add to the conversation.

 

There is new credit card legislation--some of which is already in place, the rest kicks in in February--that forces issuers to hold promotional rates for six months and places several restrictions on raising rates during the first year (for example, in most cases the issuer cannot raise a rate on existing balances). Certain fees are also limited, and finance charges cannot be applied to any balance repaid over time. Although it seems like a great idea, it leads to several implications from the financial side:

 

1. Consumers are already seeing fewer unsolicited, pre-approved card offers in the mail (fourth quarter numbers are way down) because more stringent underwriting practices will need to be applied. Banks will shift focus to in-branch offers or offers on their own website so they can easily look at the customer's history with other accounts. Although mailings like ewizabeth linked to makes perfect sense.

2. Variable rate cards tied to an index will be more common.

3. Other fees not addressed by the legislation will become common. Are you ready for an "inactivity fee"?

4. We could very well be seeing the end of no annual fee cards, depending on how much revenue the issuers are losing.

5. As has already been discussed, card issuers will lower maximums in order to reduce risk.

 

Considering your goal of building a credit score and paying off your charges each month, I would look for a simple, no-frills card with a 0% balance transfer rate for the first few months. As Baldkin noted, those promotions are relatively common.

[pretendastronaut]

The game they played with you about jacking your rate up and lowering your credit line to just above what you had on there, and using the debt-credit ratio excuse, is being played by countless credit card companies right now in response to new government regulations that take effect in February. We have three credit cards and all three have done that and one was an American Express that we literally have never used for a purchase. You should have also gotten a notice with the rate increase allowing you to opt out of the rate increase, but in doing so you would also be closing your account with them. Per law they have to make that offer to you 45 days in advance now.

Edit: Didn't have jschris' response when I opened this thread. Sorry to echo some of what was just said.

[JJHardy7]

Don't go there. Number 1, do not reinforce their ad campaign. Number 2, you have to pay a bunch of money for it, so it's not free. What is free is annualcreditreport.com. You can get your report free once per year there and make disputes. I disputed a bunch of crap on my report that was my ex-wife's and was assigned to her per our divorce agreement. It all comes off my record in 2011, and I can't wait.

 

Well the ads suck. You do get one free report. I'm paying a monthly fee right now to track it on a daily basis. I had a vendor claim that I didn't pay for some $80 item. I never owed the money since it was under warranty....well that account went 'delinquent' so it lowered my credit score by a decent amount. I signed up for the monthly monitoring to ensure that it would be removed (which it was). I guess I'm speaking more of being able to track it on a daily basis if there are issues. I'm sure there are other places available, but I like freecreditreport.com so far. I can probably cancel it soon since my score is back to where it should be. I guess I just would recommend having some type of monitoring tool to be able to track what is making up the credit score on at least a monthly basis. I was able to track down the collections agency this way and explain how I got screwed and they had the item removed within a few business days. Like I said, I'm not saying freecreditreport is the best, but something along that lines might be worth a shot. It is nice to get e-mails and alerts when a 3rd party is checking my credit. I was aware of this during a refinance on my house, but it is interesting to see all the 'hard' requests that are done. Fortunately for me all of mine were justified and all mortgage related.