In a Time of Financial Peril, Credit Card Firms Yanking Plastic Privileges
U.S. financial consumers just can’t catch a break in 2020.
After massive layoffs, weak global economic performance, and outstretched household budgets linked to the ongoing pandemic, now comes news that 70 million Americans (of 330 million in total) experienced a credit limit reduction or credit card account closure during COVID-19.
That data comes Matt Schulz, credit card guru at CompareCards. Schulz tracked credit card account activity across the U.S. over a 60-day period. What he found indicates credit card firms are squeezing U.S. credit consumers on both ends of the equation, getting more aggressive about card payments and approvals on one side and restricting account flexibility on the other side.
This from the study:
--- 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.
--- Nearly one in three cardholders (34%) said they had their credit limit reduced on at least one card in the past 60 days.
--- Most credit limits were reduced by $1,000 or less, but more than one in five limits (22%) were reduced by at least $5,000.
--- Nearly nine in 10 cardholders (89%) who had their credit limits reduced said their card issuer notified them of the move, but almost one in six (15%) of those said no reason was given.
--- The survey also found that one in four cardholders (25%) said they had at least one credit card closed by their card issuer in the past 60 days.
CompareCards has done yeoman’s work keep tabs on how credit card companies, in particular, are turning their backs on U.S. consumers – just when millions need access to credit most.
“When CompareCards first asked cardholders back in April whether they’d had a credit card closed or credit limit slashed involuntarily during the COVID-19 crisis, we were so surprised with the results that we re-ran the survey to ensure the legitimacy of the numbers,” Schulz says. “However, after the second run, those numbers rang true. Nearly 50 million cardholders had one of these actions taken against them by a card issuer.”
Schulz lays out a comparison between credit card consumers in March and April and the same demographic in May to July. Here’s what he found.
--- During the 30-day period from late March to late April, about 50 million cardholders were affected (i.e., had credit tightened or had a card account closed). That’s 1.7 million per day.
--- During the 60 day period from mid-May to mid-July, about 70 million cardholders were affected. That’s 1.1 million per day.
Schulz says that millennials are experiencing the roughest treatment from card providers, but the pain is spread fairly evenly. For example, high-income earners are almost as likely to say that they’ve either had credit lowered or had their accounts shut down.
Call it a sign of the times or call it financial institutions shutting out Americans at a time when they need all the financial help they can get.
Credit card providers don’t seem to care. They seem to sleep just fine at night, even if one eye remains open on cardholders who show any sign of financial vulnerability.