Chase Cuts Credit Cards Limits for Many Cardholders
I first wrote back in April about credit card issuers reducing credit card limits for new and existing customers. Synchrony, Discover and Chase were mentioned in the article. Now Chase seems to have ramped up the practice, with many reports of lowered credit limits in the last few days. Chase has sent out letters or emails to let cardholders know that their credit card limit has been reduced. Some people might also just see a reduction in credit limit, but haven’t received an official notification yet.
Reduced Credit Limits
Chase is reducing credit limits for some customers, sometimes even as high as 50%. Letters that have been sent out state that the cardholders has spent far below the available credit limit over the last 12 months and as a result will see a reduction to the limit by a certain percentage in 30 days.
Here are some examples of these reports here and here. A reader also sent me an email saying that here credit limit was cut down by 50%, from $30K to $15K, and she has a credit score of ~800.
Reason for Reduced Limits
The pandemic and its financial impact are likely the main reason for these reductions. Millions of Americans have been taking advantage of the relief programs offered by credit card issuers, such as no interest or deferred payments for a few months. With many people unemployed right now, credit cards are a lifeline to continue making essential purchases, when there is no other income or savings.
The higher the limits on the affected card, the bigger the exposure is for the banks. Bank try to limit their credit risk. If people run up their credit card balances to the limit and then default on their debts and file for bankruptcy, banks are out of luck. In the case of a Chapter 7 bankruptcy for example, credit card companies are prevented from taking any further collection action.
Lower Limit Might Affect Your Score
When it comes to calculating your credit scores, credit utilization is one of the most important factors. That is the ratio of your outstanding credit card balances to your credit card limits. If your balance is $300 for example and your credit limit is $1,000, then your credit utilization is 30%. Anything under 30% is okay, but something closer to 1% is perfect. So if credit cards issuers are lowering credit limits, that will increase your credit utilization if you are carrying a balance.
Check If Your Credit Limits Were Decreased
Let me know if you were sent a notice from Chase about a decrease in your credit limit for a credit card. The decrease seems to have been a percentage of the total, and 50% is the highest I have seen reported, which is pretty drastic.
If you’re not sure what your credit limit was before, you can check previous statement credits in your account and compare to your current limit.
