Saturday, November 08, 2008

Is This Where the Sacrificing Begins?

I'm -- so far -- fortunate in this economic crisis. I guess. I have a job and can pay my bills. There have been down sides: like everyone else, my food and other costs have risen (although inexplicably, gas expenses have plummeted). I canceled plans to both buy a new car and build a backyard shed because I expect little-to-no income next summer due to decreased enrollment at My School. Therefore, the summer belt will be really tight.

But so far I'm ok. (A little superstitious about putting that in writing, though!)

I get a raft of junk in the mail every day. I deal with the good stuff and the urgent stuff right away, and then once a week -- or less often -- I open, sort through, recycle or shred the rest. Yesterday I was hard at work on this annoying task and opened an envelope from one of the companies with which I have a credit card to find a letter notifying me that my card has been canceled because I haven't used it lately.

Maybe this is normal. Maybe this happens in good times -- I don't know. I've never had a card canceled before over a zero balance. This was my only American Express card. Maybe that had something to do with it. Or maybe it's this company's way of reducing its risk, although it seems strange to go after the ones who pay the bills.

Last weekend, I was online at my Lowe's account and asked for an increase in my credit line because they hadn't yet processed a large payment I'd made, and they had a 12 month no-interest deal in place. I needed to buy the last of my kitchen cabinets and a few other final expenses on the kitchen, and I wanted to take advantage before the deal expired last Sunday. I received an instantaneous doubling of my credit line, more than I wanted or needed, but fine. The "experts" say that the available-credit-to-used-credit ratio is extremely important in determining credit scores. The larger the gap the better. And this is one of the reasons I'm angry about that other card's being canceled.

I've seen another change in my available credit in the last week. I have two Lowe's cards, and the company links them on the website. One is a store card only, and the other is a small Visa that I haven't used in a while (again, no balance). I went online yesterday to pay on the store card and noticed that my credit limit on the unused card had been cut in half. Perhaps this was because they raised the limit on the other card; perhaps it was because of the non-activity.

This is an unnerving trend.

I have another card from the company that canceled my AmEx card. It hasn't had a balance since March, and it's one of my oldest cards. This is another thing the credit experts say: keep those old cards open (and active) because it makes you look good to have long-established credit. So the next financial errand I run, I'll use that card, wait a week or two, and then pay off the balance. They'll have to find some other pretense for canceling that one. Worse, I have a fistful of cards without balances. Again, I want them primarily to establish myself as a responsible person, worthy of credit but not maxing out my cards. I guess I'll have to rotate them around -- buy groceries on one, then pay it off. Pay for gas on another -- then pay it off.

I wonder if what's happening now in the larger economy will in any way impact how credit scores are determined -- especially if companies are going to be canceling cards and lowering credit limits. Probably not. As our "available balances" plummet -- if this is how it's going to be done -- we may see our credit scores drop. I hope not. But even if we as individuals change our good habits not one whit, I have an uneasy feeling we're going to pay the price anyway.

Edit: Maybe this isn't exactly about the current economy after all, but instead one company's odd business practices. I found this on "Ripoff Report" and it's about the same company that closed my account:

This is the most ridiculous thing I have ever heard. You must use your credit card constantly or it will be cancelled. I opened this account in 1987 & my credit limit was 14,900+. The last item I charged was $293 in September of 2007.

I receive a letter telling me the account was cancelled due to inactivity. I tried to access this account online & it was closed also. I ran my credit bureau and it stated that I closed the account. NOT!!!

When I called and asked to speak to a supervisor the response I got was that at their discretion any inactivity from 6 months to a year can be cancelled. I told them I had 6 months inactivity and it was a 20 year old account & I wanted it reactivated. They flat out refused & told me I had to reapply.
My account had been zeroed out for about 6 months, too. You better believe I used my other card with these people, my much older one, yesterday...


kkryno said...

The "logic" of the credit card companies never ceases to amaze me.
That sector of the financial world wields way too much power over our lives. More policing for these guys would certainly benefit everyone. I feel that eliminating the fine print factor for consumers is paramount; as they seem to make up the rules as they go along. It's made me very wary of having a credit card at all.

Bitty said...

There's a coda to this story. I continued the mail opening and found one letter telling me a credit line had increased $200 and another letter telling me another credit line had increased $1500. So I really don't know what's going on.

they seem to make up the rules as they go along

Amen, sister! I have one of those services where, if I like, I can renew my credit reports for the three major services every day and review them. The service offers me "advice" from each of the three services for improving my credit. The "advice" is contradictory. One tells me I have too much credit and I should close some accounts. ("Experts" all over the web say not to close well-established accounts. Most of mine are. I've had one, for instance, for 26 years.) Another says I don't have enough, although in that case it wants me to get some variation. Since I have a fistful of credit cards and my student loans, I'm not sure what variation it wants. (I'm not going to get a mortgage just to make my credit score happy. I don't even know if that would.) I recently opened a line of credit at my credit union for the express purpose of varying the type of credit I have, but the c.u. would only give me a very small one -- because it said I had too many accounts. My contact said that I should not open any more accounts for two years.

All righty then.

None of my accounts are past due -- ever. Most of them have no balances. Several I have specifically to take advantage of no interest/no payment for one year offers. It's like layaway in reverse.

You're right: they have too much power. And as the Fed drops the prime lending rate, the rates we pay are still ridiculously high.