Credit Junkie

by Scott Bilker
Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the editor and publisher of DebtSmartŪ.

Hi,
Mr. Bilker! I'm a big fan but would like to share and get your opinion on what happened to me when I balance transferred several accounts. I'm also a credit junkie so am very aware of the status of my credit reports. FYI, My credit reports have no negative accounts and I want to emphasize all my payments are on time and I never go overlimit.

I paid off many higher-interest rate cards with some of my lower rate and 0% offers. When I did, instead of having several cards with less than 50% usage, I had several cards with 0% usage (the higher rate cards) and several with 70-85% usage (the lower rate cards).

What followed was a dramatic decrease in my credit score of 60 points due to "using at least 50% of credit limit on 5 credit cards." This drop caused alarm in the "risk" department at American Express as they decided to cancel my extended payment option though my 2 cards with them were left open.

I realize you have so many cards, this situation probably didn't impact you, but it has definitely impacted me. I thought it was important to note that even when my overall credit ratio usage went down and is considered positive, the fact that over 50% of the credit limits on several accounts was used resulted in such an extremely damaging score drop.

My question is this: Have you dealt with this situation with your clients and what have you done, if anything, to deal with it?

Again, thank you very much! I hope to hear from you soon!
Carol

Carol,

Thanks for writing!

First off I want to let you know that you're on the right track by paying off your high-interest rate cards with lower-rate offers! I also don't think you're a "credit junkie" because those words create an image of someone who uses their credit lines for frivolous purchases. You're using your credit power to save money and take control of your finances!

Credit card banks are always looking at your credit report. They say that they want to make sure that you have the same credit standing as you did when you opened the account. If they find that you don't, they'll change your terms and raise your interest rates as a penalty. I see this as simply another excuse for banks to collect more money from their customers, or victims that don't read the fine print or complain! I talk more about this in an article titled Penalty Rates.

In your case, you rearranged the amount of debt on each card without changing the total debt and American Express penalized you. Well, it's time for them to learn a lesson!

Give them a call and tell them that you want the extended payment option back on both cards. I would say, "Here's the deal. I have many other credit cards to choose from to spend my money in interest charges. I bet they'll love some new business. In fact, I'm seriously considering canceling all my American Express Accounts unless those extended payment options are returned to my accounts, pronto."

If the first representative you speak with says they cannot do it, then ask to speak to their supervisor. If the supervisor doesn't do as you ask, then I would transfer my balances to the other cards, and close the American Express accounts, to teach them a lesson.

Of course, you'll want to call your other cards and say, "I'll transfer my balances today from my American Express card if you give me a nice low-rate transfer offer. And while you're at it, why don't you raise my credit limit."

American Express needs to understand that you have other options. You don't have to accept their terms. You can go somewhere else and do business with other banks.

Good luck and please let me know what happens!

Regards,
Scott