by P.J. DiNuzzo August 5, 2020
Credit cards are a lifeline for many people when they go through an economic crisis—which is most families today. But an article on the HerMoney website notes that many credit card issues are pulling away this safety net from under some of their most vulnerable cardholders. They are starting to cancel credit cards and cut credit limits from customers without their permission.
Why? The article notes that during the Great Recession, 10% of all credit card bills went unpaid. Banks are simply trying to get ahead of the situation this time, by identifying riskier customers. Interestingly, that includes people whose cards haven’t been used in the last 6-12 months; the card isn’t making money for the issuer, but poses a risk if somebody decides to run up the balance. The advice: make a small purchase with any seldom-used card now, and then pay it off.
People with a low credit score are likely to see a cut in their credit limit. However, the major banks have put hardship programs in place that give relief to those who need it. You would need approval for a deferred payment, a lower interest rate or fees waived, but banks are typically more willing to work with people who admit their financial difficulties than those who seem to be ignoring them.
P.J. DiNuzzo, CPA, PFS™, AIF®, MBA, MSTx