Would you believe that your access to credit on a credit card can be reduced based on where you shop? As reported in Atlanta newspaper, a consumer with a perfect payment history and high credit scores received a letter from American Express advising him that his spending limit has been slashed because “other customers who have used their card at establishments where you recently shopped have a poor repayment history.”
American Express defends the practice, arguing that their computer models support their decision. Unfortunately, American Express has not given us any clues as to what type of establishments raise the red flag. Here are a few suggestions, which I offer with tongue partially in cheek:
- go to the most expensive jewelry store in your town and buy a watch battery or leather band using your credit card
- find a Rolls Royce or Bentley dealership and buy a turn signal bulb
- visit a top line steakhouse, go to the bar and buy a Dr. Pepper using your Amex card
- I could go on, but I think you get my drift
If this practice becomes more widespread – and there is no reason to think that it will not – you probably do want to think about how to best “manage” your credit card use. First and foremost – pay your bill on time. We already know that you should avoid using more than 30% of your credit limit on any card. If you have a card that has not been accessed recently, use it – even for one or two purchases – to keep your account fresh and to avoid getting canceled for non-use.
I think it is safe to assume that credit card issuers will be contracting access to unsecured lines of credit. This will force all of us to rethink how we do business. Don’t be so quick to whip out that credit card. Cash and debit cards work just as well.
