According to a new survey by Lending Tree’s Compare Cards website, about a third of US credit card users, about 70 million people, have lowered their credit limits or inadvertently closed accounts since mid-May. . Blame the coronavirus.
Card issuers are lowering credit limits to avoid potential losses for cash-strapped Americans, many of whom may have difficulty making payments as the economy falters from the impact of the pandemic. “That means more cardholders should expect their credit card limit to be lowered or dormant accounts to be involuntarily closed,” LendingTree analyst Matt Schulz said in his survey analysis.
Millennials ages 24 to 39 who earn at least $ 75,000 a year were the most affected group. Lenders are likely to close accounts because those cards have not been used regularly.
Consumers should consider moving small recurring payments, such as their monthly fee for a streaming service, to an inactive card and setting up automatic payments, Schulz said. That way, a card remains active and available for emergencies.
Still, the decision of whether to lower limits or close accounts is up to the lenders. The law does not require lenders to inform cardholders if they have decided to lower their credit limits. However, about 9 out of 10 respondents said they were notified of a reduction, although they were not always told why. In some cases, consumers said the lender cited inactivity or a delay in paying the reduction.
The nation’s credit card debt is approximately $ 1.1 trillion and has been growing steadily since 2015, data from the Federal Reserve show. That debt was already crushing families before the pandemic, said Jill Schlesinger, senior business analyst at CBS News.
In fact, payment delinquencies peaked at seven years shortly before the pandemic, according to Schlesinger. “Many of these credit card accounts will not be able to receive full payment for a long time,” he said.
Other 50 million people They lowered or closed their credit card limits in April.
“The good news is that even though a higher percentage of cardholders said they were affected in this survey than our April report, it appears that the pace of these actions slowed slightly,” Schulz said.
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