If you use credit cards a lot, be careful. It looks like AMEX is already assessing risk based on WHERE you shop -- because there is no law to prevent them from doing this. Other credit card companies are sure to follow.
Credit card debt and mortgage debt are two sides of the same coin on the American personal finance landscape. And now, it appears they are poised to become a two-headed monster. Consumers with credit card debt can expect to feel the walls closing in on them in the coming months, as card-issuing banks search for creative ways to cut back on risk and raise cash.
On Tuesday, msnbc.com reported on a new policy at American Express that allows the firm to penalize consumers based on where they shop and which bank holds their mortgage. Given the tenuous state of the credit card-issuing business, expect other issuers to follow suit, if they haven’t already. Experts say consumers also should expect their credit limits to be lowered for what might seem like arbitrary reasons and their balance transfer fees to climb.
"Consumers are probably not accustomed to that but we live in a new world," said Carol Kaplan of the American Bankers Association, explaining the new caution among lenders. "(Banks) have suffered a lot of losses and they are doing whatever they can to reduce risk. They have people that work all day and all night who try to come up with new formulas to assess risk."
Some elements of those formulas might surprise you. Few consumers would consider the credit limit implications of the stores they shop at -- and in fact, they can't, as American Express wouldn't tell MSNBC.com which stores it deems as "risky." Still there's nothing illegal about the practice, and with losses mounting, it's not surprising that card issues are resorting to new tactics.
http://redtape.msnbc.com/2008/10/how-credit-card.html
