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THE TRANSATLANTIC MAGAZINE

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Americans Experience Credit Cuts During Coronavirus

Almost 70 million people in America have had their credit cards closed or limits cut since the pandemic began

Published on July 23, 2020

If you continue to hold a US Credit Card, you could be one of almost 70 million people in America to have had your credit card limit cut, or your credit card account closed altogether. In a new survey from CompareCards.com, the firm found that "About 70 million cardholders had a credit card’s credit limit reduced or a card account closed altogether by their issuer in the past 60 days."

After polling over 1000 credit card holders, the firm found that nearly 1 in 3 respondents (34%) said that their credit card limit had been reduced on at least one card in the last 60 days, with 1 in 5 people reporting their limit had been reduced by over $5000. 1 in 4 respondents, 25% of cardholders, said they'd had at least one of their cards closed within the last 60 days.

Among those most affected by reductions in their credit limit were young millenials (aged 24-31), older millenials (aged 32-39), and Americans earning more than $100,000. Matt Schulz, Chief Industry Analyst at CompareCards, explained that "Millennials don’t have as long a credit history as Gen X or baby boomers and thus might be seen as riskier. Meanwhile, people with higher incomes may be more likely to have higher credit limits. In this time of great economic uncertainty, unused available credit poses a risk to issuers, so they take steps to trim it back."

The poll also looked at how cardholders had been notified of reductions and closures. According to Schulz, credit card issuers "have a lot of freedom" when it comes to reducing limits, "and often aren’t required to inform you of these changes. If your credit limit is reduced due to a mistake on your part (such as being 60 days late with a payment), they must tell you they’re doing it and why. If your card issuer decides to reduce the credit limit on an inactive or dormant card or even close the account altogether, they typically don’t have to let you know."

89% of respondents to the survey said that they had been notified about changes, although 15% said that credit limit reductions were conducted without a specific reason outlined. For those who did receive a reason, "about half said they were told it was because of a credit score decrease or a late payment. About 1 in 4 said they were told the change happened because of inactivity."

If you have a UK credit card, UK banks and lenders introduced a payment holiday structure early on in the pandemic for those whose income had been affected. Many are extending these provisions, some to as far ahead as October, to assist those who continue to be financially affected by the lockdown. The intention is that payment holidays shouldn't affect your credit history, as delayed payments won't be marked as "missed" payments, however there are reports that payment holidays could affect your 'creditworthiness'.

If you've been affected by credit card changes or need further information on credit, do contact your bank or lender in the US or UK to find out more about your position.

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