Gephardt: What To Do When Credit Card Issuers Cut Your Limits

Aug 14, 2020, 6:12 PM | Updated: Jun 19, 2022, 10:02 pm

SALT LAKE CITY, Utah — If you’ve had your credit card abruptly canceled by your bank or your limit lowered recently, you’re not alone. Millions of Americans have had this happen to them as banks try to curb their risk in the uncertain pandemic economy.

According to CompareCards, an estimated 70 million of us had our limits slashed or our accounts canceled by banks between mid-May and mid-July. This is an addition to the 50 million cardholders who had this happen to them in April.

In the latest survey, most credit limits were cut by no more than $1,000. Still, 22% of those limit drops were at least $5,000. And one in four cardholders told CompareCards that at least one of their credit cards was closed involuntarily by their card’s issuer.

“Banks don’t know who is risky to lend to and who is safe to lend to,” said Matt Schulz, chief credit analyst for LendingTree, the lending marketplace that owns CompareCards. “When the economy is good, they’re willing to give out credit pretty easily, like we saw all the way up to February. But when the economy turns, all that calculus changes and they start to view unused available credit that people have as risk, and they want to pull that back.”

Schulz said banks and credit card issuers are trying to stave off potential losses from the pandemic’s economic impact. And they can cut your limit without advance notice, even if your job situation is still fine and you are still paying bills on time.

“There’s really nothing that you can do to guarantee that you won’t be impacted by a credit limit reduction or a card closure,” he said.

You get punished in the process because this lowers your overall available credit and that lowers your credit score — possibly big time — because 30% of your FICO credit score is made up of how much available credit you have. The lower your score, the more you pay for a house, a car, insurance, or a loan.

So, what can you do?

“Make sure that none of your credit cards are completely inactive or dormant,” Schulz advised.

Banks and credit card issuers cancan cut your limit without advance notice, even if your job situation is still fine and you are still paying bills on time.

Get those cards out and use each of them for a small purchase. It could be a grocery run, a streaming service or a tank of gas — something under $50. Then completely pay it off and repeat every couple of months.

Another option: Ask your bank to restore your limit.

“You can call your card issuer and ask them to reconsider, or at minimum, to give you a reason if they didn’t,” said Schulz. “No guarantee that it’s going to work, but it certainly can’t hurt to ask. If you have a long-term relationship with that card issuer, they may consider giving you a break and helping you out.”

As for when banks will stop slashing limits like this, Schulz said it probably won’t end until we have some sort of certainty about the coronavirus, and that may take finding a vaccine.

KSL 5 TV Live

Top Stories

KSL Investigates

fireworks injuries study...
Matt Gephardt

Study: More people need E.R. care after playing with fireworks

A report from the U.S. Consumer Product Safety Commission may throw a wet blanket on your 4th of July plans – or at least make you think about bringing a wet blanket with you just in case your family’s celebration adds to a troubling trend.
3 days ago
Peter Ingle talking to Matt Gephardt...
Matt Gephardt & Cindy St. Clair, KSL TV

Too risky to insure? Why your homeowner’s insurance could go up in smoke

There are good reasons for an insurance company to drop your homeowner’s coverage. But what happens when you’re dropped for something you have no control over? KSL Investigator Matt Gephardt went out to find: can they do that?
4 days ago
FILE - Thousand gather at the Utah State Capitol to support a woman's right to choose. (KSL TV)...
Daniella Rivera

‘It was hastily passed’: Medical, legal experts raise concerns about Utah’s abortion trigger law

Senate Bill 174, passed by the Utah Legislature in 2020, was crafted, in part, to send a message. Now, medical and legal experts are sounding alarm bells about how it will work in practice.
7 days ago
FILE - Credit and deposit cards on a computer keyboard. Electronic commerce, business. Online shopp...
Matt Gephardt

Gephardt Busts Inflation: Americans shy away from using credit cards abroad, missing out on best exchange rates

As COVID-19 wanes, travel agencies are seeing a massive spike in bookings as folks look to spread their wings and travel abroad.
7 days ago
KSL-TV's Matt Gephardt talks to the couple to see how this accident happen....
Matt Gephardt and Cindy St. Clair, KSL TV

Utah couple gets hit with sky-high surprise air ambulance bill

A perk of hitting that out-of-pocket max limit on your health insurance is usually, your insurance covers all other expenses for the year 100%. When a Highland couple continued to get bills, they asked KSL Investigator Matt Gephardt for help.
10 days ago
Bitcoin and other cryptocurrencies are all making news with wild up-and-down swings in value. (File...
Matt Gephardt and Sloan Schrage, KSL TV

Congress considers crypto legislation: What you need to know

It's been a rough year for cryptocurrencies. Prices reached record heights this past November, but by last week, crypto has lost $2 trillion of its market value. Now, there's a new plan for the Feds to regulate cryptocurrencies.
11 days ago

Sponsored Articles

hand holding 3d rendering mobile connect with security camera for security solutions...
Les Olson

Wondering what security solutions are right for you? Find out more about how to protect your surroundings

Physical security helps everyone. Keep your employees, clients, and customers safe with security solutions that protect your workplace.
Many rattan pendant lights, hay hang from the ceiling.Traditional and simple lighting....
Lighting Design

The Best Ways to Style Rattan Pendant Lighting in Your Home

Rattan pendant lights create a rustic and breezy feel, and are an easy way to incorporate this hot trend into your home decor.
Earth day 2022...

How Are You Celebrating Earth Day 2022? | 4 Simple Ways to Celebrate Earth Day and Protect the Environment

Earth Day is a great time to reflect on how we can be more environmentally conscious. Here are some tips for celebrating Earth Day.
Get Money Online...

More Ways to Get Money Online Right Now in Your Spare Time

Here are 4 easy ways that you can get more money online if you have some free time and want to make a little extra on the side.
Lighting trends 2022...

Lighting Trends 2022 | 5 Beautiful Home Lighting Trends You Can Expect to See this Year and Beyond

This is where you can see the latest lighting trends for 2022 straight from the Lightovation Show at the Dallas World Trade Center.
What Can't You Throw Away in the Trash...

What Can’t You Throw Away in the Trash? | 5 Things You Shouldn’t Throw in to Your Trash Can

What can't you throw away in the trash? Believe it or not, there are actually many items that shouldn't be thrown straight into the trash.
Gephardt: What To Do When Credit Card Issuers Cut Your Limits