The financial fallout of the coronavirus pandemic is continuing, with many banks expecting more missed credit card payments. According to a report from the Wall Street Journal, many lenders and banks are anticipating a second wave of missed payments, like the wave in March.
Credit Card Relief During Coronavirus
Many banks are providing credit card payment relief during the coronavirus pandemic, including Capital One, Chase, and Discover, but how long this offer can last remains to be seen. Credit card payments are one of the first payments a person avoids in financially difficult situations. The reason for this is that things like rent, a mortgage, groceries, and other essentials, take precedence over revolving credit.
Lenders Seek to insulate Themselves from the Impact of COVID-19
As the economy continues to decline, banks likely will look to protect their best interests – a trend that is already beginning. Banks are already reducing the credit limits of subprime credit cardholders. Other lenders are even closing accounts with no notice. Both issues will decrease the financial exposure of lenders during the COVID-19 outbreak at the expense of customers.
These steps are the latest attempts by lenders to stave off further hits to company bottom lines. Both Discover and Synchrony, for instance, are experiencing severe value drops, with shares in both companies dropping by more than 50% in the last week.
“Very Quick and Cataclysmic”
Some lenders, such as JPMorgan Chase, have sought to insulate themselves from the economic impact of the coronavirus by setting aside billions of dollars to cover for the losses of credit card payments. This step is not universal among banks, however, meaning the real impact is unknown. “We clearly have already had significant deterioration,” Discover CEO Roger Hochschild told The Wall Street Journal. “This was very quick and cataclysmic.”
Because of the impact of the coronavirus on personal finances, it is essential that consumers monitor their credit. Credit monitoring services can help cardholders keep an eye on their credit report, ensuring they have the resources available to navigate the economic crisis. They should also practice the correct techniques for keeping a good credit score. These include restructuring debt, keeping credit utilization low, and keeping older accounts open. And, if you can avoid missed credit card payments, do so. Otherwise, contact your lender as soon as possible.