The offers came with offers of free gifts, interest-free trial periods if you'll transfer balances, and rewards programs. When you said yes, you were also rewarded with a sheet of pre-printed checks - some of them filled in with figures like $1,000, $2,000, and even $5,000.
Just put that check in your bank account and go have some fun!
But all that was last year.
Now, only a few selected consumers get offers in the mail, or "ready to deposit" checks from their current credit card issuers.
Now credit card companies want only those customers who represent low risk and high revenue. So they've been closing unused accounts and lowering credit limits, while increasing interest rates.
American Express, while also using those tactics, took an additional step during March and April: They offered significant "bribes" to current account holders who would agree to pay off their balance and close their accounts.
The bribe consisted of a $300 pre-paid credit card, and it was offered to card holders who their scoring systems identified as those who might go into default in the coming months.
Most of us have been led to believe there is just one score: The FICO score. But this isn't true. Lenders, insurance companies, and others are keeping dozens of scores on each of us. These are the kinds of scores used to predict which card holders pose the greatest
Other card issuers, such as Chase, have been offering similar, but smaller bribes to customers who have gone into default. Chase, for instance, offered a $25 card to customers in exchange for brining their accounts current.
This is just one more defensive step being taken by card issuers who are seeing near record numbers of defaults and charge-offs.
Closing accounts is, as you may know, detrimental to consumers. 30% of the FICO score is based on the amount of available credit to debt, and when a credit line disappears, the ratio changes - lowering the consumer's FICO score.
Since high credit scores are required to get the best rates on credit cards, car loans, mortgages, and even retail accounts, consumers should consider their future plans before voluntarily letting go of any open line of credit.
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