Today’s Atlanta Journal-Constitution contains a very interesting article entitled “Consumer Profiling? – His card’s limit was cut over where he shopped.” The story describes the plight of a 29 year old businessman named Kevin Johnson who received notification from American Express that his credit limit was being reduced. Why? According to Amex “other customers who have used their card at establishments where you recently shopped have a poor repayment history.”
Mr. Johnson notes that he has a perfect payment history with American Express, a solid credit score and that he does not exceed 30% of his credit limit. He also reports that American Express will not offer any explanation as to which particular charges triggered the action from the credit card issuer.
Mr. Johnson’s personal credit profile does not seem to matter to the credit card issuer. Instead, Amex’ model makes assumptions about Mr. Johnson based on the stores where he shops. American Express has refused to offer any explanation as to how their model works, which is kind of baffling as it is not too difficult to imagine that some enterprising lawyer will find a client and file a lawsuit accusing the credit card lender of a form of redlining.
It will be interesting to see what kind of fallout this revelation about American Express’ credit policies will generate. My wholly unscientific guesses as to the type of activity that may trigger a credit reduction include:
- use of credit cards to pay groceries
- use of credit cards to pay tax debt
- using credit cards to pay restaurant tabs when you are running a high balance
- a pattern of use that shows an increasing frequency of credit card use at bars or clubs
What do you think about this form of credit profiling? Will you now change how you manage your credit card use?