Banks put lower limits on new credit cards

[rk911]

lifted from the Sunday, August 30, 2020 edition of The Daily Herald.

https://edition.pagesuite.com/popov...3a81ec-2d07-4e8e-83c1-42741261182d&appid=1031


this just happened to us. the credit limit on our 'emergency' card wss reduced 66% from $15k to $5k.

____________________________________

By Jenny Surane (Bloomberg)

U.S. credit-card lenders are beginning to pull back on the business even as consumers keep up with their bills during the coronavirus pandemic.

Total credit on new accounts slumped 8.3% in the second quarter from a year earlier, to $78 billion, the first decline in more than two years, according to data compiled by credit-reporting company TransUnion. The average credit line issued for new accounts fell 9% to $5,257, with declines across all tiers of borrower riskiness, the figures show.

[mod edit for copyright, see Gumby’s FAQ https://www.early-retirement.org/forums/f32/copyright-the-dmca-and-cut-and-paste-62748.html ]

 

[njhowie]

Did they give you a reason why they decided to lower your credit limit?

Do you have any idea why they would decide to lower your credit limit, other than they're just doing it for everyone?

We have two credit cards with relatively high credit limits, which I really don't think we've ever come anywhere close to. However, if either decided to lower the limit, I would be calling them immediately to get it set back to where they are now. We've been with each for 20 years, never missed a payment, etc., etc.

Keep in mind, if you find yourself unable to stay within the credit limit month to month, you can always pay mid-month or more frequently. With online payments, it's easy to do and make an instant payment whenever you like. Back in the day, before there was online payments, I was running a business and my supplier would charge my credit card (racked up close to 1 million AA miles from that). Initially I "only" had a $10,000 limit and as business grew, I found myself mailing checks two or three times a month to stay within the limit. After a couple months of that, I finally called and was able to get them to raise the limit.

 

[Dtail]

Didn't know they could lower one's credit with no request to do so.
It theoretically would lower one's credit score too, for those that care.

 

[rk911]

Did they give you a reason why they decided to lower your credit limit?

Do you have any idea why they would decide to lower your credit limit, other than they're just doing it for everyone?
.

the email stated it was to, and i'm paraphrasing, better fit our buying patterns. my guess it was for the reasons stated in the article. it's not a problem for us. this is our "emergency" card (in case other cards are lost/stolen/compromised) but we also use it for regular, recurring automatic payments. we don't carry any long-term debt (cards are auto paid in full each month) and our credit score is 800-something. we don't live or die by our credit score but it will be interesting to see what effect the reduction will have.

 

[jazz4cash]

I had one card closed after many years of inactivity. Another warmed it would not be renewed unless i used it. I wonder how they decide the limits for new applicants. They don’t ask and the last couple I got were huge.

 

[Scrapr]

My Cap One card just got lowered from $10k to $5k. It is my overseas card. And I haven't been overseas in 3 years (and counting) I just did default to it when my Alaska card got compromised. I may bump it up when (if) I get across the pond again

 

[mountainsoft]

We have two credit cards through US bank and still have a 20K limit on both, even though we rarely use them anymore. Last year we got a new card through Citi bank, and it only came with a 5K limit. The limit has not changed since we opened it.

In any case, I pay off the card balances once or twice a month and rarely have a balance over $1500 (usually just a few hundred). Even the 5K limit is plenty for us.

 

[Sunset]

Didn't know they could lower one's credit with no request to do so.
It theoretically would lower one's credit score too, for those that care.

CC companies did it during the last recession.
It was to protect themselves from some folks, out of work, racking up huge debts they could never pay.

It would lower someone's credit score if they carry debt month to month, as the utilization ratio would increase. Not a problem if you pay off your cards all the time.

 

[njhowie]

It would lower someone's credit score if they carry debt month to month, as the utilization ratio would increase. Not a problem if you pay off your cards all the time.

This is generally not correct. Utilization is calculated using your balance as reported by the credit card company at the end of your billing cycle, not what it is after monthly payment.

https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/

It's important to understand that your credit utilization rate — and by default your credit scores — can be affected by the timing of when a credit card company updates your balance information with the credit reporting agencies. Typically, credit card companies update this information every 30 days at the end of your billing cycle. It's possible that you could make a payment on one of your credit cards but not see the impact on your credit scores for a few weeks, when the credit card company updates your balance information with the credit reporting agencies.

When I check my credit report, the credit card entries show monthly statement balance before payment.

 

[Dtail]

This is generally not correct. Utilization is calculated using your balance as reported by the credit card company at the end of your billing cycle, not what it is after monthly payment.

https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/



When I check my credit report, the credit card entries show monthly statement balance before payment.

I time the payoff cycle and the credit card reporting cycle to be 4 days apart, so the utilization is usually low but not zero, to mostly maximize this aspect of the credit score.

 

[Accidental Retiree]

My Cap One card just got lowered from $10k to $5k. It is my overseas card. And I haven't been overseas in 3 years (and counting) I just did default to it when my Alaska card got compromised. I may bump it up when (if) I get across the pond again

DH and I had the same situation for our Cap1 cards. I use mine infrequently, but he used his all the time, and even then got his limit halved.

 

[Pasha]

My Cap One card just got lowered from $10k to $5k...

I got the same message last week.

 

[audreyh1]

Didn't know they could lower one's credit with no request to do so.
It theoretically would lower one's credit score too, for those that care.

I once had my credit limit reduced because I applied for a third card from the same issuer. I was replacing my initial no rewards card. If I’d known what I know today, I would have simply called them and explained that I wanted to switch my original card. I don’t think it reduced my total credit limit with them compared to before I got the third card.

 

[whatnot]

Same thing with DH Capital 1 card. But to be fair, he had not used but 1-2x in past 3 years. We canceled the card since we don’t need it.

 

[RE2Boys]

the email stated it was to, and i'm paraphrasing, better fit our buying patterns. my guess it was for the reasons stated in the article. it's not a problem for us. this is our "emergency" card (in case other cards are lost/stolen/compromised) but we also use it for regular, recurring automatic payments. we don't carry any long-term debt (cards are auto paid in full each month) and our credit score is 800-something. we don't live or die by our credit score but it will be interesting to see what effect the reduction will have.

Yep, that is what Cap One told us also as they cut the credit limit in half. It is our foreign travel and emergency back-up card for us and my son's, but used pretty infrequently. We last used it in Costa Rica in February and one college son used it in March at a place that would not accept his Discover card (on-line I think).

 

[sengsational]

Related... Clark Howard has updated his "use back of wallet cards twice a year" to be three times a year (or 4?). Anyway, more often. I bought a stack to the gas station the other day and put $5 on each, but the tank got full, and the last one only got $2.18

 

[Chuckanut]

Cap One is being very aggressive in lowering limits. There fear seems to be that if the economy continues to tank or it gets even worse, people will run up huge amounts on their credit cards that they can't pay off.

Interestingly, I have had my limit lowered twice in the last 6 months. After the first time, I decided to use Capital One's ENO system to pay small recurring bills with that system. This way if the card is compromised, I don't have to change every thing to the new number. Apparently, that was not enough and they cut the limit cut again last week.

I don't care very much since the card only rewards me with 1.5% cash back. I can get 2% on anything with another card, and often 3-5% when using the right card for the right purchase.

 

[Mark1]

Sometimes when I log into on-line account the CC company will ask me to provide my annual income. At first it annoyed me, but I always do it just in case not providing this information would trigger a credit limit lowering (??).

 

[grasshopper]

No limit cut on my CapOne World with $25K. But I got a WalMart Rewards card 5% at WM for the first year in March and gave me a $3K limit. I am maxed out at CapOne with 2% CD's for us.

 

[Sunset]

This is generally not correct. Utilization is calculated using your balance as reported by the credit card company at the end of your billing cycle, not what it is after monthly payment.

https://www.experian.com/blogs/ask-experian/credit-education/score-basics/credit-utilization-rate/

When I check my credit report, the credit card entries show monthly statement balance before payment.

Good to know, although I was comparing carrying a balance vs paying off the CC all the time, and the problem people faced last recession with cash flow issues due to CC lowering limits.

Carry a balance:
Owe $5,000 on CC with $8,000 limit.
Next month charge $2,000 , and pay off $2,100
CC company reduces limit to $5,500 , now utilization is high and can only charge $500 on card.

Pay off each month:
Charged $5,000 on CC with $8,000 limit.
Next month charge $5,000 , and pay off $5,000
CC company reduces limit to $5,500 , now utilization is high but can still charge $5,000 on card.

Sometimes I let a CC remain unpaid until after the statement is generated, so it will show a balance to be paid. As sometimes I want to show I'm utilizing the credit line.
Other times I pay off the CC before utilization is calculated, so it shows hardly any utilization.

 

[calmloki]

^ Gotcha beat: US Bank offered a no annual fee card with a $500 bonus for spending $4500 in 150 days. It was a huge PITA getting the card, with lots of calling and mailing and sending pictures of my driver's license and such, but the more difficult things are the more stubborn I get, so I persevered. First card was lost in the mail and the 150 days was ticking down, causing me to miss a group of autopay utility bills for about $1000 that I was planning to use as part of the spend. Finally got the physical card and they gave me a - drum roll -$1000 credit limit. The next four months I was making two payments/month on the card, with extra difficulty, because the amount due wouldn't show online and allow me to pay for a period of time. It was almost like US Bank didn't want me to be able to get that $500 bonus.. Heh. they don't know me so well, do they?
Did meet the required spend in the required time, from 12/6 to 4/17, but it was a struggle. Was pleased to take the bonus and cancel the card.
I remember card limits being cut last recession and it being a real shock to those who were counting on their cards and home equity lines of credit as being just like available money. So far no limit cuts here - think the last card we got was a CapOne Spark card with a $20k limit back in March. Waiting for PenFed to cut our $40k limit card that we hadn't used since 2017, then put a few charges on in the middle of this year.

Edit: ^ kinda in response to Grasshopper's post on the $3000 limit card.

 

[sengsational]

Heh. they don't know me so well, do they?

I wonder if this clamping down on credit is a reliable leading indicator of the economy, or just lumbering financial firms not wanting to be called out for not seeing it coming.

 

[rk911]

I wonder if this clamping down on credit is a reliable leading indicator of the economy, or just lumbering financial firms not wanting to be called out for not seeing it coming.

we have three cards and so far only one, the Cap1 card, has lowered our credit limit.

 

[EQMAN]

Target just lowered our credit. We do not use the card much but I thought it odd.

 

[Teacher Terry]

None of ours have been lowered.