Major US issuers cut consumer credit card limits by $99 billion last year, with Capital One alone lowering limits by $30 billion and Citi and Chase each slimming down theirs by $19 billion, per Bloomberg. These decreases disproportionately affected consumers with lower credit scores (between 580 and 669), whose borrowing capabilities contracted 30%. Conversely, limits among consumers with superprime credit scores (740+) rose $81 billion, according to estimates by TransUnion.
Card issuers made credit limit changes anticipating a financial crisis, but a 2008-style collapse of the financial system ultimately failed to materialize.
Issuers will boost credit limits for subprime borrowers as pandemic conditions improve and the economy bounces back, as expected by financial experts. Treasury Secretary Janet Yellen said the US could reach full employment by 2022, and MorningStar analysts projected a rise in consumer spending in 2021 and 2022. This economic improvement should justify issuers increasing credit limits once again, and some already are: Capital One began raising limits for existing customers with prime and subprime credit scores in February. Other issuers will likely follow suit, especially because many are counting on increased consumer spending to lift volume, which has remained sluggish throughout the last few months.