Hard times are hitting many people where it hurts – right in the credit cards they carry in their wallets or eWallets.
Customer spending limits are being cut by top credit card companies. It’s a response to the COVID-19 pandemic that is crashing the economy and taking away the jobs of millions of Americans, according to Bloomberg News.
Discover Financial Services said in a regulatory filing that more of its customers are asking to skip payments. “As the number of loans enrolled in these programs increases, our financial results will be adversely impacted in the short term due to forgone interest,” Discover said.
The company said it is decreasing the credit lines of some customers and also cutting back on its efforts to gain new customers.
This is a big change of heart for these companies, and reflects the growing economic crisis. Before the pandemic, such companies tended to ramp up marketing campaigns to pull in more customers and loan out more money.
The Bloomberg report notes that “lowering credit limits during a period of economic uncertainty can inflict lasting damage to client relationships.”
As reported by PYMNTS, consumers are already in a better position than when the Great Recession hit in 2008, and they have comparatively less debt.
In addition, consumers have been spending less during these hard times. Social distancing regulations and lockdown measures have drastically cut into the types of purchases they would typically make.
Looking ahead, consumer spending is likely to rebound slowly, given job losses and the anxiety of the current times.
For its part, Discover said it has already signed up almost a half-million accounts – about $3.6 billion in balances – into “skip a payment” programs. “The pace of recovery is uncertain and unpredictable,” the company said.