Not too many people are happy with American Express these days. In fact, it would be safe to say that AmEx has earned the ire of many of their customers lately… or maybe that would be ex-customers. The stories of cancelled cards, drastically reduced credit limits, denied transactions – and without proper notice from the company, all ring too familiar. And that’s only the tip of the iceberg.

Even loyal customers who’ve established credit histories that spanned years of good performance but missed the payment due date once by a day or two, got all their cards cancelled. Not even those who own multi-million dollar businesses with credit limits amounting to hundreds of thousands were spared.

It seems that AmEx has given free rein to a computer program of sorts that is running through the customers’ database with a fine-tooth comb, picking up every single instance of a credit misstep, regardless of how insignificant the amount and how long ago in the past the incident was. Actually, that’s only a theory being floated around; but how else could one explain the sudden slashes in credit limits? And what’s with the surge in failed transactions because of seemingly “fraudulent” charges?

Needless to say, these moves of the company have inconvenienced (at the very least) many of their customers. After all, it can’t be much fun being denied the use of one’s credit card while on vacation, or having one’s business transactions suddenly in limbo because of the cancellation of both personal and business cards.

An American Express card has always been known as THE credit card, the institution priding itself on having the “cream of the crop” among credit card customers. A few years back, the company was aggressively taking on new customers particularly of the upper class bracket, spending heavily for recruitment campaigns which undoubtedly paid off. Between 2002 and 2007, usage of the card grew by 15% annually, a feat that peer companies were unable to match. So now why the sudden rush in showing clients the way out?

The answer is simple. Like any other financial institution in the country today, American Express has been hit hard by the credit downturn. From a low of 4.7% a year ago, AmEx cards’ default rate sharply increased to 8.3% in January this year. With numbers this grim, it is no wonder the company is fast trying to manage risks as best as the situation allows.

AmEx CEO Ken Chenault expressed as much in his letter to shareholders in 2008. “As we had expected, late payments and write-offs in our charge card and lending portfolios increased throughout the year,” he stated. He further added that they have started efforts to reduce exposure to risk, which include “selectively reducing lines of credit.”

Keeping in mind the reason for American Express’ seemingly overeager steps to thin out customer ranks, many of these clients are still asking what constitutes a risk for the company. For instance, can a reliable credit history that’s been nurtured for years really be destroyed in a single slip-up? Apparently, giving the benefit of the doubt is something unheard of in the industry these days.

Certainly, American Express is not the only credit card company to tighten their standards. Similar tales of unused accounts being unceremoniously closed or sudden surges in interest rates have become all too common even with other cards. While credit card holders could never fault these banks and financial institutions for observing more prudence in dealing with accounts, the question lies on the way that these companies have been conducting their risk management efforts.

Consumers’ complaints have become so loud that they have reached the ears of the White House. With the President himself pushing for reforms in the credit card industry, perhaps credit card customers can finally get the service they deserve.

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  • Sharon

    Sounds like an add to Chevy Chase. I’ve been very happy with ING and was sceptical about capital one but have had the same good service from both entities.