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Credit Card Line Decreases

Credit cards are one of the most commonly held and widely used financial products for consumers. Credit cards also play a critical role in many consumers’ finances, not only as a routine spending mechanism, but also as a source of flexibility during financial hardship. Yet a consumer’s available credit can disappear, sometimes without warning or subsequent explanation. Credit line decreases (CLDs) are an industry practice where a credit card issuer reduces a consumer’s credit limit amount on their existing open account. As credit cards are a fundamental component of consumer credit access and financial resilience, understanding the impact of CLDs on consumers can help inform policymakers and market participants on the importance of these credit limit account management decisions.

In this report, we first examine the prevalence of CLDs on a consumer’s highest balance general purpose credit card account. Next, we observe the typically significant reduction in available credit on the affected card following a CLD. We show that median utilization rates on the affected card reach over 90 percent for prime-and-below-scored consumers and examine changes in consumer balances after a CLD. For these consumers, the CLD effectively removed most available credit on that credit card and significantly reduced total available card credit. Finally, we describe changes in consumer credit scores and consider the implications of CLDs on future credit opportunities.

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