Once the pandemic hit many creditors took notice and acted swiftly in a very obvious direction of tighten the reins restricting on how much credit they offered to customers in order to minimize their risk.
Many of the major creditors have followed this path in order to reduce their risk on how much credit they extend to customers this includes both reducing credit limits along with closing accounts deemed overextended in credit expenditure.
This effected everyone as individuals with high 700 credit score, very long credit history, and never missed payments either had their credit limits decreased or accounts closed overnight.
What can be done to stop your credit limit being decreased or account closed
Nothing. This is well within the rights of creditors and they can do so immediately, at any time or duration, without being required to notify the individual essentially happening overnight and those customers usually find out when they wake up through an email.
Often a robot or AI once given certain parameters will determine all credit card accounts in their portfolio to be inside or outside the new risk tolerance of the company and will immediately either reduce the credit line or close those accounts, so the decision is generally decided by a machine rather than a human being.
There is the option after the fact once your credit limit has been lowered to contact the issuer and ask for your credit limit to be restored to the original limit number. Some have been successful if they have multiple lines of credit or banking with the issuer through decades of history with the financial institution especially a credit union.
However considering even the best credit score and history individuals are being denied it is a toss up on results. If the credit card account itself was closed there is very little chance of the decision being overturned.
How does this affect you?
When a card has the credit limit altered or even closed then the balance vs limit comes into play and results in a higher or lower credit utilization ratio.
The importance of the credit utilization ratio is it makes up a significant amount of your credit score as it has a high impact worth of the credit profile and when utilization is higher which is bad can result in often denied credit card applications, credit line increases, car loans, mortgage loans, etc.
Credit Utilization Chart. Source
A very important part of credit and when credit card limits are lowered or closed then the utilization ratio if a balance is present will significantly rise as often thousands of credit line extended are retracted from the overall credit profile.
Along with some individuals will have multiple credit cards from one credit card company and if they all are closed can cause a person to lose a high portion of their total available credit limit to go down.
Overall, this is a natural normal process that goes on during troubled economic times there is not much else to do beside vigilantly checking ones overall credit profile and simply waiting for the tides to turn.
References
https://www.cnbc.com/2020/05/19/you-might-not-get-approved-for-a-new-credit-card-right-now.html
https://www.bankrate.com/finance/credit-cards/issuers-lower-credit-limits-coronavirus-response/
https://www.businessinsider.com/personal-finance/credit-card-issuers-lower-credit-limits-what-to-do-2020-4