Credit card firms pay some clients to close their accounts

NEW YORK -- If you've recently been offered cash from a credit card company to reduce your debt or close your account entirely, be forewarned: Your business may no longer be wanted.

"What the card company is saying is that right now we're playing nice, but if you don't take it, we might start playing hardball" by raising rates or cutting credit limits, says Justin McHenry, president of IndexCreditCards.com.

In a new promotion, American Express is giving an undisclosed number of consumers $300 if they pay off their balances and close their accounts. Citigroup c and CompuCredit ccrt, meanwhile, are offering a credit to reduce debt for some borrowers who agree to pay significantly more than the required minimum.

For an industry that makes money when consumers pile on debt and pay the minimum, the promotions are a telling sign of issuers' struggle to shed risk and clean up their balance sheets. In recent months, banks have also closed inactive credit card accounts or slashed borrowers' credit limits en masse.

McHenry says lenders are "desperately" trying to get as much money from consumers as possible in case they default.

Issuers now consider any open line of credit risky. That's because even responsible borrowers with good credit could suddenly find themselves out of a job or in financial distress as the economy spirals downward. At a time when more borrowers are juggling bills, issuers hope their promotions will put them first in line to be paid, says Megan Bramlette, managing associate at Auriemma Consulting Group.

American Express axp spokeswoman Molly Faust says its promotion — which requires borrowers to pay off their balance by April 30 — targets people with high balances and little spending and payment activity. In general, these consumers are not profitable for banks because they don't generate high finance or other fees, says Bramlette.

Citigroup spokesman Samuel Wang declined to discuss its promotion. But Wang says it offers card borrowers facing financial difficulty a variety of programs to assist with their debt.

CompuCredit's promotions help some borrowers reduce their balances but don't require that they close their accounts, says spokesman Thomas Donahue. Other offers help consumers pay off debt on already closed accounts, he says.

As the economy slows, credit cards have become a lifeline for a growing number of consumers who've used them for groceries, gas and other necessities.

Revolving debt, most of which consumers carry on credit cards, grew rapidly in recent years along with the economy. Yet in November and December, such debt fell as consumers found themselves with less credit and pared back their spending, says Aite Group senior analyst Ron Shevlin.

TELL US: What would it take to get you to close an account?