No, having no income has no impact on credit score here. Only defaulting on repayment does.
Yes, banks can withdraw the credit facility on either a credit card or overdraft, but in practice they only do in specific circumstances.
And the linked article - apart from being UK based, you might notice it's from March 2009.... A bit of a cleanup at the height of the crisis doesn't make something common practice.
Thanks for that, seems a little risky to continue to give large credit volumes to people with no income, but that's the modern banking system.
However, the fact remains, your credit limit can be withdrawn, at any time, by the bank. There is no control over that, they don't need any excuse, and there is no guarantee that another economic crisis won't hit in the near future. If there is another downturn, it would lead to large job losses and financial institutions would be "cleaning up" their credit risks. The emergency fund is real cash and the individual has total control over the fund. A bird in the hand, so to speak.
If someone has an emergency fund, say 5000 euros and they have a credit card bill of 5000 euros then there may be circumstances when it is beneficial to pay off the credit card bill. The two teachers in the programme were right to do this, as they have secure employment, and other savings in the credit union.
I'm just saying that people in more precarious employment, on contract, or self employed might be more vulnerable if they used their emergency fund to pay off the credit card bill.
They could be faced with no job, no income, a drastically reduced credit limit and no way to pay the mortgage, or rent. It might be better to manage the credit card bill more conservatively, paying off over a longer period, in case an emergency happens. It will be more expensive, but could be viewed as an insurance policy for themselves.