Roughly 70 Million Cardholders Had Credit Limits Cut or Accounts Closed
Credit card issuers have been cutting credit limits for new and current cardholders in recent months. They have even started closing unused credit cards, more than usual, during the pandemic. But a new survey shows that the numbers are drastic. Roughly a third of U.S. credit card users, about 70 million people, have had their credit limits reduced or accounts closed involuntarily since mid-May, Lending Tree’s Compare Cards website says.
The survey found that 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.
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.
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 most common reasons given for the reduced credit limits or account closures, were credit score decreases, inactivity and missed payments. The survey found that millennials are most likely to have had credit limits slashed and cards closed.
Card issuers are cutting credit limits to avoid potential losses from cardholders who could struggle to make payments during the pandemic. “That means that more cardholders should expect to have their credit card’s limit slashed or to have dormant accounts closed involuntarily,” LendingTree analyst Matt Schulz said in his analysis of the survey.