Approximately 50 million American credit cardholders have had their credit limits slashed amid the coronavirus pandemic.
Per a consumer survey by Lending Tree’s Compare Cards website, about one in four credit card holders have either had their credit limits cut or their accounts closed in the past 30 days. The survey also revealed the credit curb impacted men between the ages of 18 and 38 the most.
According to LendingTree analyst Matt Schulz, lenders, albeit not required to inform customers when their credit limits are being lowered, made the decision a month ago to skirt losses in case cardholders couldn’t manage their payments considering the exponential increase in unemployment in the United States.
Given the state of today’s health and economic climate, which has caused many American households to rely heavily on using credit cards, it should come as no surprise that the survey also shows 42 percent more cardholders used their credit card in the last month compared to last year’s stats.
“While the moves make bottom-line sense for card issuers, they don’t make it any easier for cardholders,” Schulz told CBS News. “The reductions and closures come at the worst possible time.”
For context, Federal Reserve data reveals the total credit card debt nationwide is roughly $1.1 trillion and has been rising steadily since 2015. “Many of these credit card accounts will not be able to get paid in-full for a very long time,” added CBS News Senior Business Analyst Jill Schlesinger, who said payment delinquencies had already been at a seven-year high prior to the pandemic.
More than 30 million people have filed for unemployment in the United States since the coronavirus outbreak. Last week, more than 16 percent of the labor force had been laid off, furloughed, or have suffered reduced hours due to the crisis, which has spawned more than 1.2 million cases of COVID-19 in the States as of Tuesday morning (May 5).