Credit card issuers will lower credit limits amid coronavirus outbreak
ATLANTA - Many families may rely on credit cards to get through this tough time, but know that credit card companies are very likely about to lower your credit limit. This happened to most of us during the recession in 2008. That $3,000 card limit card was suddenly $1,500.
At the time, creditcards.com, an online resource for credit card information, showed that 20 percent of card companies cut the credit limits for its good credit customers. Poor credit? Sixty percent of card issuers slashed their spending limits. An industry analyst says to help offset this, use those cards that you never use.
“Bring those cards out of dormancy. Bring them out of your wallet. Find them in the bottom of the drawer. Use them. Sometimes demonstrating activity can be the first step to keeping a card active,” said Ted Rossman of creditcards.com.
Why would they do that? Well, the card issuer isn’t making money on it. They don’t want you using it, then losing a job and not being able to pay your bill. So, they’ll preemptively close it out. Use it. Pay it, then it becomes an active card.
Now, here’s something that’s going to surprise you. Getting a stimulus check or money in the mail like a refund? Don’t use it to pay off that credit card. You might need it.
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“Usually, I would say any found money like a tax refund maybe should go toward your debt. I think the rules have changed there because it’s uncertain. People are struggling. I think if you need to carry credit card debt for a time, I think that’s OK. I think it’s more important to get that cash buffer in place,” Rossman said.
He’s not saying blow off paying your credit card bills. He’s saying, pay your monthly bill, but don’t pay off the balance on the card. Keep that money for savings or for necessary spending - at least for now.
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If you do get behind, you make the preemptive strike. Call your credit card issuer before it’s an issue. Tell them you’ve lost your job. See if they’ll work with you, maybe move you to a zero-interest card if you qualify. Perhaps change your due date. Get on the record that you reached out before they did.