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.

• Major US issuers took a more cautious approach to credit limits to reduce the risk of defaults in the wake of widespread unemployment. In April 2020, the US unemployment rate surged to 14.8%, and issuers were quick to react: They lowered credit limits and introduced financial assistance programs to help customers experiencing financial difficulties as a result of the pandemic. Issuers were worried the pandemic would put many consumers at greater risk for credit card payment delinquency.
• But many consumers actually became more conservative spenders and were able to lean on government assistance. Many consumers heavily prioritized essential purchases like groceries and personal care items. And overall, many steered away from credit cards. In fact, consumer credit balances fell 9.6% year over year in Q4 2020, per TransUnion, and the delinquency rate for credit card loans fell to 2.12% in the same period, down from 2.63% in Q4 2019, according to Federal Reserve Economic Data. Instead of leaning on credit cards, many consumers were able to rely on government aid during the pandemic.

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.