✅Why your credit limit might be lowered due to coronavirus
The COVID-19 pandemic swiftly pulled the global economy into a tailspin, and many are still worried about how this current recession will affect their own finances and credit. A few months ago, we warned about the potential for issuers to start cutting credit limits. Reports of these cuts have now become more prevalent — specifically from Chase.
If you are one of the cardholders that had their credit limit drastically cut recently, not all hope is lost. Today, I’m walking through why issuers cut credit limits during economic downturns and what you can do about it.
For more updates about how coronavirus is affecting travelers and credit cardholders, sign up for our daily newsletter and bookmark our dedicated coronavirus news hub.
What to know about recent credit limit cuts
Why do issuers cut credit limits?
Long story short, it’s all about mitigating financial risk for the banks.
Credit card companies determine your credit limit based on a number of factors. The type of card you have, your income, your personal credit score and payment history, your current credit utilization ratio, internal issuer standards and more, all have an effect on the limit you are given — you can even request an adjustment if you feel your current one is too low or too high. When any of these factors change, an issuer may decide to cut back on the credit they extend to you.
Related reading: Here’s why you should never turn down a credit limit increase
But the state of the economy can also play a large role in issuers’ decisions to cut back on spending limits. When the economy is in decline (as it is now because of the coronavirus pandemic), issuers often lower credit limits across accounts with low utilization.
We have taken this video from YouTube and posted it on our site and if you are the owner of this video or you have any problem with this video please contact us