Have you checked the credit limits on your credit cards lately? If not, you might want to take time to do just that, especially since roughly 50 million Americans’ credit card accounts were either closed or had their credit limit cut in the past 30 days. That’s about 1 in 4 credit card holders, and of those, men between the ages of 18-38 years old were particularly affected.
What’s even worse is that lenders are not even required to tell you when your credit limit is lowered, so you may not find out until you’re ready to actually use that credit card. Why now, you wonder? Truthfully, this is another financial side effect of the COVID-19 pandemic. Early on, lenders reviewed accounts, then lowered some credit limits to reduce their risk of loss if it appeared that consumers would struggle to make payments, or even use the cards to live on, as unemployment skyrocketed across the country.
Sadly, these credit cutbacks occurred just when household budgets were hit the hardest. Not only are families using their cards frequently right now, but some are having to use them to make ends meet until unemployment funds start coming in, or to buy essential goods.
Unfortunately, even though this makes sense for the credit card companies, it didn’t make things any easier for consumers. But, in their defense, total credit card debt has been growing steadily since 2015, and is hovering right around $1.1 trillion nationwide. And, even before the pandemic, delinquencies had already hit a seven year high as many families struggled to meet payments.
While we don’t have exact details, some cardholders have reported credit limit reductions in the thousands of dollars, so you’ll want to log in to every account to check your limits. Then, if you find your credit limit has been reduced, contact the issuer and request that they reconsider the reduction, or even in some cases, closures of accounts that have been dormant for some time.
In fact, you may want to consider moving a couple of small recurring payments to a dormant card, like Netflix or Hulu subscriptions, and set it up on autopay to handle payments, just so that the card is not considered dormant (and subsequently closed). Just that one regular monthly charge will keep your credit card account active without adding any unnecessary expense to your budget, thereby preserving the now-active card’s larger spending limit for true spending emergencies.