About 70 Million Cardholders Saw Credit Limits Shrink, Card Accounts Closed Involuntarily in Past 60 Days

Rhea-AI Summary

According to a recent survey by CompareCards, approximately 70 million credit cardholders experienced involuntary credit limit reductions or account closures from mid-May to mid-July 2020. This represents more than one-third of credit card users. Notably, 34% reported having their limits reduced, with many experiencing cuts of $1,000 or less. Reasons cited include credit score declines, inactivity, and missed payments. Although the number of affected cardholders grew, the pace of these actions appeared to slow slightly. Men, high-income individuals, and parents with young children were the most impacted groups.

Positive

• Survey indicates a slight slowdown in the pace of credit limit reductions compared to previous months.

Negative

• Significant number of cardholders (70 million) saw credit limits reduced or accounts closed.
• 34% of respondents experienced credit limit reductions.
• 22% had limits reduced by at least $5,000, indicating potential severe impacts on credit availability.

CHARLOTTE, N.C., July 22, 2020 /PRNewswire/ -- About 70 million people – more than one-third of credit cardholders – said they involuntarily had a credit limit reduced or a credit card account closed altogether in a 60-day period stretching from mid-May to mid-July, according to a new survey from CompareCards. 

Full report: https://www.comparecards.com/blog/credit-card-limits-cut-card-accounts-closed-pandemic/

Key findings:

• 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 1 in 3 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 1 in 5 limits (22%) were reduced by at least $5,000.
• Nearly 9 in 10 cardholders (89%) who had their credit limits reduced said their card issuer notified them of the move, but almost 1 in 6 (15%) of those said no reason was given.
• The survey also found that 1 in 4 cardholders (25%) said they had at least one credit card closed by their card issuer in the past 60 days.
• The most common reasons given for the reductions or closures: Credit score decreases, inactivity and missed payments.
• The most likely groups to be affected: Men, high-income Americans, parents with young kids and minorities.

Card closures and credit limit reductions keep climbing

When we 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 found that nearly 50 million cardholders had one of these actions taken against them by a card issuer.

In this most recent survey, the numbers were even bigger. 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.

• During the 30-day period from late March to late April, about 50 million cardholders were affected. 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.

This latest survey shows that while virtually all groups of people are having these actions taken against them, some are getting hit harder than others.

• Millennials are the age group most likely to have a credit limit slashed or a card closed.
• People with the highest incomes are the most likely to say one of these actions had happened to them.

Most credit limit reductions weren't huge

• The most common amount of credit lost was between $501 and $1,000 – and more than half of all reductions and closures involved $1,000 or less.
• More than 1 in 5 (22%) cardholders who had their limits reduced said the reductions were $5,000 or more.
• A similar percentage of closed card accounts had credit limits that were that high.

Most issuers notified cardholders about credit limit reductions, though they didn't always have to

• The survey found that 89% of those whose card limits were reduced said they had been notified.
• Among those who had received a notification that their card was closed or their credit limit reduced, 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.
• Even if notified of the change, many cardholders weren't given a reason why it happened. For example, 15% of credit limit reduction notifications didn't include a reason.

The bottom line

We're several months into the pandemic and one of the few things we know for certain is that no one knows exactly when this is going to end. Because of that, it's likely that we will see banks continue to be cautious when lending. There are simply too many unknowns and too many risks for card issuers to handle things any other way.

To improve your odds of a surprise credit limit cut or card account closure, consider using any dormant cards more. Put a small, recurring subscription – such as Spotify or Netflix – on that little-used card to ensure that it is used each month. Then, set up automatic payments so you never pay late. If you do have your limits slashed or your account closed, you don't have to take it lying down. It might be worth asking your issuer to reconsider.

To view the full report and for more information, visit https://www.comparecards.com/blog/credit-card-limits-cut-card-accounts-closed-pandemic/

About LendingTree
LendingTree (NASDAQ: TREE) is the nation's leading online marketplace that connects consumers with the choices they need to be confident in their financial decisions. LendingTree empowers consumers to shop for financial services the same way they would shop for airline tickets or hotel stays, comparing multiple offers from a nationwide network of over 500 partners in one simple search, and can choose the option that best fits their financial needs. Services include mortgage loans, mortgage refinances, auto loans, personal loans, business loans, student refinances, credit cards and more. Through the My LendingTree platform, consumers receive free credit scores, credit monitoring and recommendations to improve credit health. My LendingTree proactively compares consumers' credit accounts against offers on our network, and notifies consumers when there is an opportunity to save money. In short, LendingTree's purpose is to help simplify financial decisions for life's meaningful moments through choice, education and support. LendingTree, LLC is a subsidiary of LendingTree, Inc. For more information, go to www.lendingtree.com, dial 800-555-TREE, like our Facebook page and/or follow us on Twitter @LendingTree.

About CompareCards:CompareCards' mission is to help people make smarter, more informed, healthier financial decisions based on deeper knowledge of financial offers. Each month, over 2.9 million visitors come to CompareCards' website to independently compare credit cards side-by-side and choose a credit card based on interest rate, reward benefit, cost savings, and other factors that are important to each person. CompareCards provides easy-to-use, objective tools and educational resources that help people do everything from making credit card comparisons to managing their credit health. For more information, please visit http://www.comparecards.com.

MEDIA CONTACT:
press@comparecards.com

 

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SOURCE CompareCards

FAQ

What percentage of cardholders had their credit limits reduced in July 2020?

Approximately 34% of cardholders experienced a credit limit reduction.

How many cardholders saw their accounts closed involuntarily in the last 60 days?

About 70 million cardholders had their accounts closed involuntarily in the 60 days leading up to July 2020.

What were the main reasons for credit limit reductions according to the survey?

The main reasons included credit score decreases, inactivity, and missed payments.

Which demographic groups were most affected by credit limit reductions?

Men, high-income Americans, and parents with young children were the most affected groups.

What is the trend in credit limit reductions observed in the July 2020 survey?

The survey indicated that while more cardholders reported reductions, the pace of these actions had slowed compared to previous months.