Surging Credit Card Delinquency Rates are Affecting Credit Limits

June 25, 2024 at 16:11 PM EDT

While credit card debt and delinquency rates often go hand in hand, overextended credit card accounts may also lead to decreased credit limits. CardRatings’ credit card experts offer tips for minimizing the impact of these possible cuts.

Approximately 9% of credit card balances fell into delinquency over the last year according to Federal Reserve data. In response, credit card issuers are decreasing consumer credit limits to minimize risks.

Bad economic conditions coupled with consumer behaviors like overspending and late payments are the leading causes of these decreases.

CardRatings.com, a leading credit card review and comparison site, offers tips for how to minimize the impact of a potential credit line cut and discusses the potential impact this could have on consumers’ credit scores, in their article: How surging credit card delinquency rates can affect credit limits

“Not only could a credit line cut affect a consumer’s purchasing power, but it could also hurt their credit score,” says Jennifer Doss, executive editor and credit card analyst at CardRatings. “This is because a lower credit limit could result in a higher credit utilization ratio, which accounts for 30% of a consumer’s credit score. The good news is there are simple ways to help negate this, such as paying down existing balances on other accounts and lowering overall credit card spending.”

Doss is available to discuss credit limit decreases and tips for handling a potential cut.

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CardRatings innovated online credit card ratings and has been offering independent ratings and reviews of credit card offers since 1998. The website collects and maintains data on more than 800 credit card offers and carefully compiles objective lists of the top credit cards by card type, making it easy for consumers to find the right card to fit their needs.