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Credit card companies deserve, well, credit for helping cardholders survive the pandemic. Most of the leading card issuers were willing to be flexible on payments, and some even waived late fees.
But many card companies also quietly but aggressively turned the screws on customers.
Amid the worst economic conditions since the Great Depression, card issuers have protected themselves by slashing the credit limits of many customers, often without warning or explanation.
Nearly a third of all U.S. cardholders had their credit limit cut or their account closed during the first four months of the year, according to a recent survey by LendingTree.
That's about 62 million people — on top of the tens of millions who faced similar issues last year.
Along with reduced purchasing power, a lower limit means you’ll probably use a greater percentage of available credit each month. This can hurt your credit score.
Rosalind Goddard, 77, was among those to be notified out of the blue recently that she's no longer considered as creditworthy as she once was.
The South Los Angeles resident said that after 36 years as a Nordstrom cardholder and frequent patron of the Seattle company's department stores, her credit limit was cut overnight to $1,000 from $5,000.
"I've been with Nordstrom for a long, long time," Goddard told me. "This was very off-putting."
She said she promptly called Nordstrom to ask what had happened. Why, after all this time, after thousands of dollars in clothing and shoe purchases, was she suddenly being treated like a bad penny?
"They told me it was because I wasn't using my card enough," Goddard recalled.
"I asked what they expected me to be using it for in the midst of a pandemic, while we're all under lock and key. I wasn't interested in buying more clothes or shoes because I had no place to go."
The Nordstrom rep, Goddard said, "apologized profusely, but she had no explanation beyond saying that I wasn't using my card enough."
Presumably the rep didn't want to admit the obvious: Nordstrom, like many card issuers, was placing its own financial interests ahead of those of a loyal customer during unusually tough times.
"This cuts their outstanding risk," said Linda Sherry, director of national priorities for the advocacy group Consumer Action.
She acknowledged that it's "fairly typical" for card issuers to reduce credit limits when borrowing subsides during normal times. But these haven't been normal times.
Many consumers living paycheck to paycheck have been forced to rely on their plastic to make ends meet. Others have relied on their credit cards as a rainy-day financial safety net during the pandemic.
"Cardholders legitimately ask, 'I am managing my credit limit responsibly and this is how they treat a long-term customer?'" Sherry observed.
According to LendingTree, more than 558,000 cardholders were hit with a credit-limit reduction or account closure every day from January to mid-April.
Lack of activity was the main reason given by card issuers for the moves, the survey found.
"Unfortunately, there's no foolproof way to keep an issuer from closing your card, but there is a simple way to improve your odds: Use the card more," said Matt Schulz, LendingTree's chief credit analyst.
"It's also important to understand that banks don't just close dormant accounts and slash credit limits during bad economic times. It can happen even in the best of times."
Schulz said people shouldn't hesitate, after an unexpected credit-limit cut, to contact their card issuer and request a higher level.
That's good advice, especially because the arbitrariness of many reductions suggests little if any thought is going into the decisions. With tens of millions of accounts involved, it's hard not to believe much of this process is automated.
You still have to wonder, though, why many card issuers are willing to alienate consumers at a time when they're desperate to have people start spending again.
Goddard's credit-limit reduction "seems shortsighted," Sherry said, "especially with the hit that high-end clothing retailers took during the pandemic."
Nordstrom, like most retailers not named Amazon, experienced heavy losses over the last year.
In the first quarter of 2021, the company posted a loss of $166 million but said it expects sales growth of more than 25% this year as the economy recovers.
That seems to validate Sherry's take: It's remarkably shortsighted to put the squeeze on a good customer just as you're hoping she and others will once again give their Nordstrom cards a workout.
And Goddard is the sort of customer Nordstrom should cherish.
"I really like what they have in the way of clothing and accessories," she told me when I asked why she's held on to her Nordstrom card since 1985.
"That's why I was really upset when this happened."
Goddard did precisely what all cardholders should do if notified of a sudden credit-limit reduction: She called the company.
She also responded prudently when the Nordstrom service rep said that to take a closer look, she'd have to inspect Goddard's credit file.
There are two types of credit inquiries, a "hard pull" and a "soft pull." A hard pull occurs when you apply for new credit. It can affect your credit score, possibly lowering it by a few points.
A soft pull is typically made during background checks or if a lender wants to inspect your credit file without your permission. Typically, this won't affect your score.
Goddard was taking no chances. "I said I didn't want them pulling my file."
Instead, she contacted me. And I contacted Nordstrom.
Within days, I'm pleased to report, Goddard received a call from a company exec letting her know her credit limit will be raised to $3,000. That's less than the $5,000 limit she previously enjoyed but considerably better than the $1,000 ceiling the company imposed.
"Lowering credit limits is a fairly standard practice for any credit card issuer," Nordstrom told me in a statement.
"We regularly review accounts, which may result in some accounts being identified as eligible for a credit line decrease. We consider a number of factors in that process, including a customer’s purchase history over a period of time."
I replied that in raising Goddard's limit to $3,000, wasn't Nordstrom admitting it went too far in dropping it to $1,000? The company had no answer.
But Goddard said the Nordstrom exec who called her "apologized for what happened and acknowledged that the matter hadn't been handled well."
The exec also confirmed that no hard pull was made on her credit file in raising the limit, and agreed to put that in writing.
"I'm very, very pleased," Goddard told me.
I conveyed to her that Nordstrom is expecting a huge increase in sales this year. Will she be contributing to that?
"Sure!" Goddard replied without hesitation. "I'm not an extravagant person, but I do like nice things."
As do many others. Which is why retailers should think twice before pushing customers around.
This story originally appeared in Los Angeles Times.