Credit Card Limits Tightening
Did your credit card limit unexpectedly decrease? If so, would you believe the good economy is the reason why?
Capital One and Discover, two of America's largest credit card issuers, recently announced a tightening of credit card limits despite the strong economy. Both companies cite risk management as the reason.
While the economy may be strong now, Americans have taken on levels of debt that may not be sustainable in tougher times. According to Federal Reserve data, total consumer (non-mortgage) household debt is over $3.9 trillion. Total revolving debt (mostly credit card debt) is just over $1.04 trillion.
Both Capital One and Discover have a relatively high percentage of borrowers with lower credit scores – according to The Wall Street Journal, approximately one-third of Capital One's card balances are held by borrowers with subprime credit scores. Consequently, both companies must be more pre-emptive at lowering risks.
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