It appears that everyone is tightening their belts during the, even . 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.
"We're continuing to utilize internal and credit bureau triggers to dynamically reevaluate the customer's credit worthiness to manage credit exposure," Brian Wenzel, Synchrony's executive vice president and chief financial officer, said during the company's earnings call last month, according to Marketwatch.
While credit card companies have to provide their customers 45 days' notice when terms and conditions change, according to the Credit Card Act of 2009, they don't have to disclose when limits are changed.
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 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.
Since the pandemic started, there has been an increase in credit card usage, with $14.1 trillion, which was the highest since the Great Recession more than a decade ago.. This comes on top of a 2019 study showing consumer debt in the US grew to