I was reading this article today and find it interesting and thought I might share with the rest of you. This also explain the series of credit card accounts being closed that belong to several of my family members and friends.

The story

This is what's been happening to them. This is all by American Express anyways. They all have good credits and were never late on any payments. And yet, their accounts are being closed for basically no reason. Some has been members for over 10 years. Yikes!!! If you were a credit card company, what kind of accounts would you try to close. The one in good standing or risky ones? If you answer the risky ones, it turns out that you're not business savvy enough. After reading the article in details, it turns out that they make more money on the risky accounts than good credit, pay on time accounts. And good accounts translate to no late fee, no interest fee and whatever sad fees that they can come up with.

So it was never about good credits. That was just their BS. It was all about how much fees and interest they can squeeze out of you. Word of advice for all of you. I think its time to cash in on those cash back rewards or programs, because once they cancel your accounts, those rewards are usually not recoverable. I think I'm next in line also.

 

I had a company credit card that was cancelled "due to inactivity" a month after I had bought a $400 camera on it. I had the card over a year, really didn't use it that often, maybe once a month. Never spent over $400 on a single transaction. My company pays it off pretty quick so they probably weren't making much interest income.

Side issue: but so most of you know, most banks make their money from fee's nowadays. With interest, they usually try and make a little bit or cover the cost of the maintaining the account.

 

In response to your side note:

Actually, that is not entirely true. We all know how much they make on interests let along late fees and whatever fees. But they have money every time the card holder make a purchase. For being a merchant, we pay certain percentage of the total amount to the bank. And American Express takes the highest percentage of all.

Just like paypal. Who gets charged for using credit cards? The person who is accepting the money. Never the less, its still small fries compare to the interest rate some people are paying.

 

There should be a law.

 

[QUOTE=d.h,Apr 3 2009, 12:10 PM] In response to your side note:

Actually, that is not entirely true.

 

A law forcing a publicly held company to do business with you?

 

Target sent me a letter stating if I did not use my card that they will cancel it. I said F that and I had a zero balance on it anyways so I just decided to close it. Funny thing is when I cancelled it the automated system said that my credit limit was only $200.00. It went down from $5K to $200.00 hahaha.

LuDawg

 

Seems VERY strange that they can or would 'want' to do this.

Perhaps if the people had lost their credit ratings due to being evicted from their house it would be justified. But in this case it's obviously the credit companies scamming more money.

I guess they are pushing people to consumer more? The easy way around it is to get a monthly bill taken out from your credit card instead of bank account. I get my internet taken out of my credit card. But then again you are better off without a credit card anyway, you are less likely to buy things you DON'T NEED.

 

Not necessarily a good strategy. One of the things that plays into your credit score is the average age of your accounts. If you had the Target card for a while, and you closed it, you could have lowered your average length of credit, which could have hurt your credit score.

 

If you don't use the cards they are closed. 30% of your credit score is your credit available. Lots of available credit = high score, not so much = low score. You want lots of large credit lines and to maintain them use each one a little each month. For example, put your phone bill on one, cable bill on another, etc. That way they all get used and stay open.