Credit chain reaction

Written by Rosa Colucci on .

The House and Senate reactions to AIG bonuses have been a side show -- somewhat entertaining but worthless. The $165 million in bonuses paid to AIG employees is nothing compared to the devastation American Express has wreaked on millions of American consumers by pulling back or canceling credit limits. It's a ticking time bomb: Every time AmEx lowers one's credit limit, it increases that person's debt-to-available-credit ratio, so AmEx has single-handedly turned millions of people with great credit scores into credit risks who can't get a loan.

To make it worse, the higher ratio of debt to available credit caused by AmEx starts a chain reaction -- other banks see the higher ratio and reduce their credit limits, which further weakens the shocked consumers' scores. The AIG bonuses have not harmed the average American, but the repercussions of having AmEx pull the rug out from millions of Americans' credit ratings and scores will be huge; AmEx cardholders whose limits have been cut should check their credit scores and review the destruction.

Last week Congress went for the TV ratings and not for those who are really harming the American citizen. AIG used bailout money to reward those who were causes of the global financial crisis. American Express is using tax dollars while destroying individual Americans.




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