topic Re: Banks are closing credit cards and slashing credit limits amid the pandemic in Credit in the News

Banks are closing credit cards and slashing credit limits amid the pandemic

KLEXH25 — Thu, 23 Jul 2020 01:13:48 GMT

"One in 4 Americans with credit cards said they had an account involuntarily shut down from mid-May to mid-July, while 1 in 3 said their credit limit was reduced, according to a new report from CompareCards.com that surveyed 1,003 credit cardholders."

The article states credit issuers are pulling back more than they did during the Great Recession of 2008, where reportedly 1 in 6 cardholders experienced reduced limits or complete shutdowns.

https://money.yahoo.com/banks-close-credit-cards-and-slash-credit-limits-amid-the-pandemic-survey-finds-170739834.html

Re: Banks are closing credit cards and slashing credit limits amid the pandemic

marcforza1 — Thu, 23 Jul 2020 02:30:11 GMT

Good article. I saw it come up on my phone so I got a chance to read it. It pretty much echoes what everyone has been saying on here about the CL slashing and who some of these lenders are specifically targeting. Seems like higher income folks are the ones seeing the biggest reductions.

Re: Banks are closing credit cards and slashing credit limits amid the pandemic

sammydavidjr — Thu, 23 Jul 2020 14:53:21 GMT

Just one note: while the information in that article is directionally correct, the source is a marketing survey commissioned by Comparecards.com: 1,003 people were surveyed. These surveys are usually done very quickly ($3 per answer via third-party providers) and tend to be quite inaccurate. One of the claims they make is that Americans with incomes higher than $100k were the most likely to be impacted by adverse actions, but when you look at the size of the credit lines lost or cut (less than $5,000) it looks like there might be a contradiction.
I work in the same field (marketing) in a different industry, and routinely commission surveys written and administered with the same goal of getting as much media coverage as possible. I wouldn't trust this one to be overly accurate.

Re: Banks are closing credit cards and slashing credit limits amid the pandemic

KLEXH25 — Thu, 23 Jul 2020 17:08:16 GMT

@sammydavidjr wrote:
Just one note: while the information in that article is directionally correct, the source is a marketing survey commissioned by Comparecards.com: 1,003 people were surveyed. These surveys are usually done very quickly ($3 per answer via third-party providers) and tend to be quite inaccurate. One of the claims they make is that Americans with incomes higher than $100k were the most likely to be impacted by adverse actions, but when you look at the size of the credit lines lost or cut (less than $5,000) it looks like there might be a contradiction.
I work in the same field (marketing) in a different industry, and routinely commission surveys written and administered with the same goal of getting as much media coverage as possible. I wouldn't trust this one to be overly accurate.

Yeah well the article didn't really say anything that we didn't know already (regarding CLD and closures). But I definitely raised an eyebrow at the number surveyed. Not enough of a sample size to really give any solid numbers.

Re: Banks are closing credit cards and slashing credit limits amid the pandemic

sammydavidjr — Thu, 23 Jul 2020 20:32:51 GMT

@KLEXH25 wrote:
@sammydavidjr wrote:
Just one note: while the information in that article is directionally correct, the source is a marketing survey commissioned by Comparecards.com: 1,003 people were surveyed. These surveys are usually done very quickly ($3 per answer via third-party providers) and tend to be quite inaccurate. One of the claims they make is that Americans with incomes higher than $100k were the most likely to be impacted by adverse actions, but when you look at the size of the credit lines lost or cut (less than $5,000) it looks like there might be a contradiction.
I work in the same field (marketing) in a different industry, and routinely commission surveys written and administered with the same goal of getting as much media coverage as possible. I wouldn't trust this one to be overly accurate.
Yeah well the article didn't really say anything that we didn't know already (regarding CLD and closures). But I definitely raised an eyebrow at the number surveyed. Not enough of a sample size to really give any solid numbers.

I agree. They simply looked for a juicy set of stats to legitimize a story and a press release that they had mostly already written in advance. These surveys are usually packed with loaded questions, administered to digital audiences that can be very skewed, and the sample size is kept small to increase the likelihood of getting counterintuitive results in some small segments. It's a great marketing tactic, but not a real quantitative research method.

Re: Banks are closing credit cards and slashing credit limits amid the pandemic

M_Smart007 — Fri, 24 Jul 2020 16:43:03 GMT

@sammydavidjr, Thank you for your marketing insight

Re: Banks are closing credit cards and slashing credit limits amid the pandemic

Remedios — Sat, 25 Jul 2020 16:56:30 GMT

While article may not provide much insight, chart certainly does.

If you feel inclined to do so, you can search for defaults and high utilization by age groups. Additionally, those groups already had highest default rates pre COVID-19, and that's exactly where I'd expect to see CLDs.

Mind your utilization, dont be late, use your cards.

Sensationalistic approach works for many because it allows for " It happened to others, cannot be me, it's the stinky lender" more often than not, that's not the case (unless it's due to non-use).

Re: Banks are closing credit cards and slashing credit limits amid the pandemic

Revelate — Sat, 25 Jul 2020 17:30:05 GMT

I actually was more interested in one of the linked articles that suggested that spending recovery is happening the slowest for those in the higher income brackets which I suspect is inversely related to the unemployment demographic.

If we were looking for signs that the economy wasn't going to recover quickly I think this might be it when the disposable income isn't being spent. I have to admit I'm still in complete squirrel chasing nut mode trying to gut this out till the end of the year, and I am not even trying to be a good consumer even though I've gone back to eating at restaurants (or more accurately take out) more often.

Re: Banks are closing credit cards and slashing credit limits amid the pandemic

sammydavidjr — Tue, 28 Jul 2020 02:22:34 GMT

@Revelate wrote:
I actually was more interested in one of the linked articles that suggested that spending recovery is happening the slowest for those in the higher income brackets which I suspect is inversely related to the unemployment demographic.

If we were looking for signs that the economy wasn't going to recover quickly I think this might be it when the disposable income isn't being spent. I have to admit I'm still in complete squirrel chasing nut mode trying to gut this out till the end of the year, and I am not even trying to be a good consumer even though I've gone back to eating at restaurants (or more accurately take out) more often.

The problem for earners with disposable income is how to spend that money: travel is impractical or impossible; a new phone is not that useful if you spend most of your time at home; a new car... to go where? There simply aren't as many opportunities for people to spend money. Plus -- earning high income doesn't mean having job security: everyone is trying to save up a little more money.
Even as the fed pumped dollars into the economy (there are 43% more dollars in circulation today than there were before the pandemic), people haven't spent more: a lot of that money is in the stock market today (in case anyone is wondering why Walls Street is doing so well even as the economy on Main Street falls apart).