Some card issuers have already begun lowering credit limits — sometimes without notice — and more are expected to follow.
In the midst of a financial crisis, that's likely to happen. Banks have less money to lend and, on top of that, cardholders are at greater risk of becoming delinquent on their credit card payments.
To mitigate that risk and compensate for less credit overall, issuers are scaling back consumer credit lines, just like they did a decade ago during the last recession. "Banks are taking a balanced approach informed by economic data, which is consistent with legal and underwriting obligations to ensure credit lines match consumers' ability to repay," said Jeff Sigmund, a spokesman for the American Bankers Association.
"Lenders right now are really just trying to re-establish their footing," added Ted Rossman, industry analyst at CreditCards.com. With a lower limit, consumers are more likely to use a greater percentage of their available credit each month , which has negative effects on their credit score and ability to borrow money.
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