50M Americans had their credit lines cut

About 1 in 4 credit card holders — or almost 50 million Americans — had their credit limits cut or their card accounts closed in the past 30 days, according to a consumer survey by Lending Tree's Compare Cards website. The reductions particularly affected men between the ages 18 and 38, according to the survey.

Lenders aren't required to tell customers when their credit limits are lowered, LendingTree analyst Matt Schulz said, adding that many lenders made their moves in the past month to avert losses if cash-strapped consumers struggle to keep up with payments amid surging U.S. unemployment

The credit curbs happened just when household budgets are particularly strained from coronavirus-related job losses and families are believed to be using their cards more frequently. The Lending Tree survey reports that 42% more cardholders said they used their credit in the last month compared to the same period last year.

"While the moves make bottom-line sense for card issuers, they don't make it any easier for cardholders," Schulz said. "The reductions and closures come at the worst possible time."

Total credit card debt is about $1.1 trillion nationwide and has been growing steadily since 2015, Federal Reserve data show. That debt was already crushing many U.S. households before the novel coronavirus struck America, according to CBS News Senior Business Analyst Jill Schlesinger. 

In fact, payment delinquencies were at a seven-year high just before the pandemic, Schlesinger said. "Many of these credit card accounts won't will not be able to get paid in-full for a very long time," she said. 

The LendingTree survey doesn't detail how much credit card limits have been reduced, but Schulz said it's likely in the thousands of dollars per cardholder. 

Businesses deemed non-essential were forced to close over the past seven weeks while government officials worked to contain the coronavirus. The closures meant companies lost millions of dollars in sales and subsequently laid off employees. More than 30 million people have filed for unemployment since then and many jobless people say they've waited more than a month to get payment

"Many consumers intend to use their cards to help bridge the gap between their last pre-layoff paycheck and their first unemployment check," Schulz said. "Having their cards' credit limits slashed makes that much harder."

Schulz suggested borrowers struggling with credit card debt ask their card issuers to reconsider their new limits. "Chances of success may not be high, bit it's worth asking," he said.

Schulz also suggested focusing on dormant credit cards, which he said "are most likely to be closed by these types of lenders." Consider moving small recurring payments to the dormant card — like a Netflix or Spotify subscription — and set up an auto-pay feature to handle the payments.

"That regular $10 to $20 charge keeps your card active without adding any unnecessary expense to your budget," he said, preserving the now-active card's larger spending limit for true spending emergencies.

https://www.cbsnews.com/news/credit-card-limits-reduced-canceled-50-million-americans/

Any OGers seen a credit line cut?  Hadn't really thought about this.  Could crush your credit score if you carry a balance, running up your credit utilization rate beyond what the credit agencies deem acceptable.

EFM - 

Any OGers seen a credit line cut?  Hadn't really thought about this.  Could crush your credit score if you carry a balance, running up your credit utilization rate beyond what the credit agencies deem acceptable.


Yea, I had a card that I rarely use (Citibank), keep it for emergencies. It auto pays the minimum every month, never been late, decent credit.They flat out sent me an e-mail that said they were not going to renew my card.

My wife’s a genius.  We have 3 cards.  We pay them off completely every month and never carry a balance.

donkypunch55 -

My wife’s a genius.  We have 3 cards.  We pay them off completely every month and never carry a balance.

That makes her a genius? 

12 Likes

i used to work in a few capacities in this industry. another trick is keeping a slightly negative balance. zero goes unreported/uncycled. -$x reports and cycles. they can still close your account if they want to, but it'll keep a precedural system closure due to non-use form occurring.

1 Like

jcblass -
EFM - 

Any OGers seen a credit line cut?  Hadn't really thought about this.  Could crush your credit score if you carry a balance, running up your credit utilization rate beyond what the credit agencies deem acceptable.


Yea, I had a card that I rarely use (Citibank), keep it for emergencies. It auto pays the minimum every month, never been late, decent credit.They flat out sent me an e-mail that said they were not going to renew my card.

I have a Citibank card with a credit line I've never understood.  No idea how it got as high as it is, never asked for an increase, they just kept bumping it and bumping it.  At one point is was higher than my salary (but not my household income).


Its come in handy a few times, I've run it up to about 80% before (and they've never reported my balance to the credit agencies).  But I haven't had a balance on it or even used more than 5% of the limit in a few years.  Curious what they do to me.

EFM - 
jcblass -
EFM - 

Any OGers seen a credit line cut?  Hadn't really thought about this.  Could crush your credit score if you carry a balance, running up your credit utilization rate beyond what the credit agencies deem acceptable.


Yea, I had a card that I rarely use (Citibank), keep it for emergencies. It auto pays the minimum every month, never been late, decent credit.They flat out sent me an e-mail that said they were not going to renew my card.

I have a Citibank card with a credit line I've never understood.  No idea how it got as high as it is, never asked for an increase, they just kept bumping it and bumping it.  At one point is was higher than my salary (but not my household income).


Its come in handy a few times, I've run it up to about 80% before (and they've never reported my balance to the credit agencies).  But I haven't had a balance on it or even used more than 5% of the limit in a few years.  Curious what they do to me.


It kind of sucks for me because I was furloughed. A couple years ago I paid off all my credit cards and closed them. I decided to only keep my Bank of America one and my Citibank Card. I am a little aggravated because the only thing on the Citibank card were some home improvement purchases I made when I bought the house. However, I paid off a big chunk of the balance with my last bonus and when I was laid off, I remember thinking, well, if it gets REALLY bad I have a lot of available credit on that card...not a situation I expect to be in, but you never know. I think they saw 1 purchase in a couple years, only paying the minimum and jumped ship after I got the balance near zero.

Yeah this seems completely bass ackwards. Were told to be financially responsible by not running up credit card debt with frivolous purchases, and to save them only for emergencies....I can't think of any bigger emergency than this. 

if this is supposed to be geared towards people with poor credit...well they're not exactly likely to have cards with high limits now are they. Just seems like fiscally smart people are the ones getting punished here

I consider myself pretty fiscally savvy but really have no idea how banks make lending decisions.

Fake Pie - 
donkypunch55 -

My wife’s a genius.  We have 3 cards.  We pay them off completely every month and never carry a balance.

That makes her a genius? 


lol. Yes. Compared to the average woman.

2 Likes

I've actually been waiting to see how much consumer credit increased after the lockdowns began.  The next report comes out Thursday at 3pm ET and will include data for March. I expected it to be bad but maybe not if limits are being reduced. 

https://www.federalreserve.gov/releases/g19/current/

 

EFM -

Any OGers seen a credit line cut?  Hadn't really thought about this.  Could crush your credit score if you carry a balance, running up your credit utilization rate beyond what the credit agencies deem acceptable.

I’ve seen the opposite. Doing the Dave Ramsey thing and paid off roughly 10,000 last month (only 4,200 left!). A few days later I got an email congratulating me that my limit rose. 

1 Like

My household has 8 credit cards.  5 of them get little to no use.  We also pay off our cards every month.  Never carry a balance.  Haven't even looked at what the limits are recently.  I will look next month and see.

donkypunch55 -

My wife’s a genius.  We have 3 cards.  We pay them off completely every month and never carry a balance.

what


she is not spending all that free money?

 

If a CC company doesn't renew or drops you, does it kill your credit score? 

That’s fucked up, people are actually struggling right now and need their credit cards. On another note thank you to factseatfeelings I just paid off a 10k CC debt from years ago by taking your advice and haggling with the cunts during this pandemic, thanks dude. 

The Closed Guard -

If a CC company doesn't renew or drops you, does it kill your credit score? 

Wouldn’t say it kills it but it obviously if CC company closes or drops you it lowers your available credit, which in turn increases the amount of credit you are using relative to available, which could cause a big hit to your score depending on your situation. 
 


For what it’s worth, Discover sent me an email the other day that they upped my limit a few thousand. Guess since there are a lot of people in a bind that aren’t paying right now they are trying to entice those that are paying into spending more?