Credit card issuers start to lower cardholder limits

[Yo_Mama_Been_Loggin]

It appears that everyone is tightening their belts during the coronavirus pandemic, even credit card companies. A new survey has found that about 25% of card owners in the US had their limits reduced or accounts closed within the past 30 days.

Almost 50 million people saw their credit limits decreased or cards closed involuntary, according to a CompareCards survey conducted in late April. Those affected were split almost evenly among Generation Z, millennials and Generation X. The online survey consisted of 1,039 credit cardholders and was conducted by Qualtrics.

Credit card issuers tend to lower limits or close accounts to reduce their risk, especially in a financial crisis like the one happening across the globe. Discover said in a regulatory filing last month, according to a Bloomberg report, that it'll slow down opening new accounts as it expects to be hit financially by cardholders asking to skip payments or delay accrual of interest.

Synchrony Bank issues credit cards for several retailers such as Old Navy, American Eagle Outfitters and eBay. It's already begun reviewing cardholders' accounts.

https://www.cnet.com/personal-finance/credit-card-issuers-starting-to-lower-cardholder-limits/?ftag=CAD-04-10abi6g&bhid=24447454298893839703959737945916&mid=12822599&cid=534320049

[crickets]

1. Ouch. K&R for visibility.

[roamer65]

2. That will hurt the credit rating of those affected.

Banks are fucking slime.

[Totally Tunsie]

3. The two most important paragraphs of that article:

A reduction in credit limits or having an account closed not only affects a person's options to pay for goods in a time of need, but it also takes a toll on an individual's credit score.

Credit utilization is a measure of how much of your available credit you're using at a given point in time, and it accounts for 30% of your credit score. When limits are lowered or accounts are closed, the amount of credit a person has decreases, which in turn raises their credit utilization and lowers their credit score.

Especially now, when so many have lost their jobs or face other financial hardships, more and more consumers will rely on credit to sustain their families. Thus is created the credit "perfect storm"...additional usage with lowered credit limits. This is going to be painful for a lot of those who are on the credit edge.

Everyone needs to be cautious and vigilant with their credit usage.

[JI7]

4. There was another article posted that more people were using debit cards these days and less credit

cards.

Hopefully most is voluntary because people are just not spending due to being mostly home.

[Totally Tunsie]

7. Debit cards are OK for the short term, but work only when there's money in the account.

If the income stream is interrupted, account balances will suffer and people will turn to using credit instead. Consumers aren't out shopping for clothing, accessories, and non-essentials, but they'll be using credit more for their basics and paying more for them due to supply and demand. They won't stop using credit; they'll just be using it differently.

[Totally Tunsie]

5. Thanks for posting this information. I hadn't seen it elsewhere.

I take pride in my credit score (827/828), and would be pissed to find it declining through no fault of mine.

[R B Garr]

6. If you read the reviews about Discover, you'll see that

that is routine for them and has nothing to do with this current situation as a new procedure. They check your credit report every year and how you use your other cards and they routinely lower limits.

[Totally Tunsie]

8. Really? I've been a Discover cardholder for exactly 30 years this month.

In all that time, my limits have never been lowered, only raised. Discover is my favored card, with Visa and MC as back-ups.

Then too, I always pay the entire balance on all cards all the time, never carrying over a balance. The credit card companies aren't earning interest charges from me, but they know they'll be paid.

[R B Garr]

11. If you Google the reviews, you will see boatloads

of people with different experiences. They do “account reviews,” during which they look at your other credit usage. I wasn’t surprised that Discover was one of the first cards mentioned lowering limits.

[Yavin4]

9. So much for opening the economy again.

Doesn't really matter now.

[GulfCoast66]

10. Thanks. I only have 3 cards. But had never added up my limit.

Which I now realize is over 80K between all 3.

That kind of crazy if you think about it. Who can pay off that kind of Credit Card Debt monthly?

Although thinking about it, after the hurricane here a couple of years ago I paid for a new roof on a credit card. Earned lots of travel miles and paid it off with the money the insurance company gave me plus the cost that was on me.

[spinbaby]

12. Mine is encouraging me to use it

I have an American Express card I use only for travel. They keep sending me offers to encourage me to use it. The latest is four times air miles if I use it for groceries.