“During the last economic downturn, many people had their cards canceled or their credit limits reduced without warning because issuers feared they would be reimbursed,” Rossman said. “It makes it dangerous to rely on credit cards as emergency funds. ”
Paying consistently on time doesn’t guarantee you won’t be affected, says Rossman, adding that even cardholders in good standing saw their credit limits reduced during the Great Recession of 2007-2009. lots of leeways to reduce credit limits without notice, ”he says. “They may even demand immediate payment of all outstanding debt.”
Rossman says cards that have not been used for an extended period of time are prime candidates for cancellation. To reduce the chances that a lender will close such an account, he suggests making a purchase, however small, with the card and then paying it back.
Tetreault says that in the current economic climate, consumers should avoid the temptation to use their credit cards. To pay for expenses they cannot afford. “There’s a sense of urgency now. People don’t necessarily feel like they have the time to look for alternatives to cover their bills,” she says.
According to the CLB, consumers should never use credit cards to pay off medical debt, taxes, mortgage payments, or student loans because better options are available to cover these types of debt. For example, there are federal and state programs that write off hospital debt for families. Those who meet certain criteria but have medical debt placed on a credit card are not eligible for such relief programs. And the coronavirus relief law’s provisions could allow many consumers to defer mortgage payments for up to a year. For more on managing credit card debt, check out the CLB’s publication. “Surviving Debt,” which is available for free during the coronavirus crisis on nclc.org.
Jeff Gitlen is a graduate of the Alfred Lerner College of Business and Economics at the University of Delaware. Gitlen has spent the past five years writing and researching on personal finance issues which include credit cards, student loans insurance, and other. His writing has been featured in top news publications among them are Bloomberg, CNBC, Forbes along with Market Watch.