Ted Rossman
speaker
196 appearances
4 recordings
1 series
first heard Dec 2018
last heard Apr 2020
Ted Rossman’s voice in public audio — every appearance, attributed to the second.
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Appearances
WSJ Your Money Briefing · Credit Card Companies Are Lowering Your Spending Limit · 27 Apr 2020
podcast
They actually have way more latitude than most people realize when it comes to changing credit limits or even canceling cards entirely.
From the bank's perspective, they're nervous.
They're worried that people may not be able to pay them back.
They remember during the financial crisis when charge-offs exceeded 10%, so more than 10% of credit card bills were just completely unpaid.
We went basically overnight from the lowest unemployment rate in 50 years to perhaps one of the highest.
So I know it's really tough timing for consumers to be getting limits cut or cards canceled, but that's the bank's side of things.
They actually have way more latitude than most people realize when it comes to changing credit limits or even canceling cards entirely.
The Card Act from 2010 had a lot of great consumer protections, but when it comes to credit limits,
there's really a ton of flexibility there.
So one thing I see a lot of is if you haven't used a card in a while, that's especially a ripe candidate for being canceled without warning.
So if you wanna keep it active, and it's a good idea to keep it active,
Maybe make a small purchase, pay it off right away.
That'll keep you going.
The other side is harder.
If you're bumping up against your credit limit or if you've paid late or if your credit score has declined recently, these are other more troubling reasons why a limit might be cut or a card might be canceled.
The best practice there is to speak up at the first sign of trouble and try to get a break from the lender.
It's actually everybody on the credit spectrum.
We can look back to the financial crisis for some guidelines.
I dusted off this 2008 Fed report that found that back then, 20% of prime customers had a credit limit cut or a card canceled without warning, and 60% of subprime customers experienced that.
So obviously, it's higher likelihood if you're lower on the credit or lower on the income spectrum.
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