May
20
2009

  Drastic Reduction of Credit

American Express was the first to reduce the credit limit on our card, and now Citibank has followed suit. We know this is not particular to us, since we have friends with high credit limits who also complained that their American Express card limit was also reduced without explanation. Back when it happened, I called to have it reinstated, but they won't do it.

I looked into it further, and it's the cash-back cards that are all getting reduced. Before I canceled the card, I looked into what replacement I would get. And I discovered that a lot of card companies are no longer issuing new cash-back cards at all, so I'm keeping my current ones, even at their reduced limits.

Per internet forums, a LOT of people are dropping Amex over this (to give you an idea of the extent of the problem, our credit limit went from $38,000 down to $4,800, and we didn't know this until our card was declined for a large purchase and we didn't know why until we looked to see our credit limit had been summarily reduced overnight). But instead of dropping Amex, we're just going to stick it to them.

They don't want to pay the cash-back percentage on large balances, so they're reducing credit limits. But the way around this is to pay off the balance twice or more per month instead of once per month. I get an email alert anytime we're within $500 of our credit limit. So when that happens, I'll just go online and pay off the balance. Then we can go on charging and not go over our credit limit. It's slightly less convenient for us, but the cash-back percentage is greater than the percentage we're earning in our checking account, so there is no penalty to paying the bill early, and decent incentive to keep running as much of our expenses through the card as possible. We're smarter than you are, Amex, and we're going to keep taking a slice of your transaction fee profits as long as you let us.