Forced Credit Account Closures Rising While More Applications Denied

MoneyTips

According to Federal Reserve data, serious credit card delinquencies rose sharply in late 2016 and continued to grow through 2018, nearing 5% of cardholders. Similarly, involuntary account closures rose from 4.2% in 2016 to 7.2% in 2018 – but why?

If the economy is doing so well, why are people having trouble paying credit card bills and having accounts closed? Credit scores provide a clue.

A low credit score is a solid indicator of risk for credit card companies. Involuntary account closures are approaching 20% for consumers with credit scores below 680, while transitions into serious delinquency are approaching 25% for those with scores below 620.

In addition, overall revolving debt (mostly credit card debt) has grown from $969 million in 2016 to $1.037 trillion as of the third quarter of 2018.

Given increases in debt and delinquency, card issuers believe they were too free with post-recession credit – and they are reacting accordingly. In t…

MoneyTipsAccording to Federal Reserve data, serious credit card delinquencies rose sharply in late 2016 and continued to grow through 2018, nearing 5% of cardholders. Similarly, involuntary account closures rose from 4.2% in 2016 to 7.2% in 2018 – but why?

If the economy is doing so well, why are people having trouble paying credit card bills and having accounts closed? Credit scores provide a clue.

A low credit score is a solid indicator of risk for credit card companies. Involuntary account closures are approaching 20% for consumers with credit scores below 680, while transitions into serious delinquency are approaching 25% for those with scores below 620.

In addition, overall revolving debt (mostly credit card debt) has grown from $969 million in 2016 to $1.037 trillion as of the third quarter of 2018.

Given increases in debt and delinquency, card issuers believe they were too free with post-recession credit – and they are reacting accordingly. In t… […]Read More