Credit Card Limit Could Be Lowered- What To Do If This Happens

The spending limit on your credit card can be cut down suddenly by your issuing bank and if this happens, you will not be a single person.

Some banks have already started decreasing the credit limit of their existing consumers in order to mitigate their transactions. This is happening because most people have lost their jobs amid this critical situation. Moreover, most people could miss their monthly salary amid global coronavirus pandemic.

Synchrony Financial US: SYF that backs most credit cards is taking a deeper look upon the ability of cardholders to repay during this virus outbreak.

Brian Wenzel, chief financial officer and executive vice president of Synchrony said. “We’re continuing to utilize internal and credit bureau to dynamically re-evaluate the customers’ credit worthiness to manage credit exposure”.

Well, other banks are also following the same tone. Banks generally mitigate the credit limit of the customer’s credit card so that the risk can be minimized.

Matt Schulz, chief credit analyst at Lending Tree US said, “When the economy goes bad, all the calculus changes”. He further added, “Because people’s financial situations can literally change overnight, unused credit lines equal major risk”.

If we decode this, it clearly indicates that banks are really worried about the upcoming outcomes. If someone makes a lot of high-value transactions with their credit card. After that, the cardholder misses the payment due to the lack of income. It will create a problematic situation for the banks.

A spokeswoman with Wells Fargo US told MarketWatch. “Periodically, we review every account, and based on a variety of factors make the decision to adjust the spending limit”.

According to American Express, the financial health of the cardholder is getting a real-time evaluation.

Ashley Tufts, the vice president of American Express said in an email, “We want to accommodate their spending needs, while also helping to ensure they do not take on excessive levels of debt”.

Jeff Sigmund, spokesman for the American Bankers Association said. “Banks are taking a balanced informed by economic data, which is consistent with legal and underwriting obligations to ensure credit line match consumer’s ability to repay”.

What To Do

People having multiple credit cards should go for small purchases. According to the banks, making a small purchase will keep the card active.

However, Schulz said that Americans should not be afraid in such a situation and they don’t need to negotiate with the credit card issuing companies.