Credit Card Issuers Tighten Standards Amid COVID-19 Uncertainty

Credit Card Issuers Tighten Standards Amid COVID-19 Uncertainty

May 8, 2020         Written By Heaven Speirs

At the beginning of the coronavirus pandemic, credit card issuers were extending credit limits to help Americans survive the financial crisis. However, new data reveals a strong drop in credit card applications since the wake of COVID-19. What can you do in this unpredictable, ever-tightening credit card market? Read on to learn how to best protect your credit during this unprecedented time.

CFPB Reports Significant Decline in Credit Card Applications

A report from the Consumer Financial Protection Bureau indicates that credit card applications dropped drastically after COVID-19 came to the U.S.  In the second week of March 2020, there was already a 6.8% drop in hard inquiries for revolving credit cards. That jumped to a 39.7% decline by the end of the month. Auto loan inquiries declined by 52.4% in March, and mortgage loan applications dropped by 34.6%.

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The decrease in credit card applications was consistent across most credit score groups, with the exception of those in the ‘super prime’ category (credit scores above 780). There were 60% fewer credit card applications for super-prime credit scores by the fourth week of March.

What caused the drop in applications? It is most likely a combination of factors. Consumers became leery about the stability of their personal finances, thus reducing the desire to get a new credit card. Card issuers have also pulled back on their marketing efforts, focusing on their existing customers, rather than acquiring new ones. Whether consumers have less access to credit cards or they’ve simply chosen not to apply for new credit, this turn of events is sure to impact the future of the credit card industry.

Credit Card Issuers May Reduce Credit Limits without Warning

In early March, many credit card issuers offered a temporary credit increase for existing customers. There was no way to predict how long those increases would last, but some customers have already had their credit limits cut, without warning. This reduces a person’s ability to make purchases, but it could also impact his or her credit score.

Credit utilization is a crucial credit score factor. This is the amount of debt a person has compared to the amount of credit available to him or her. Someone who has used $2,000 of $10,000 in available credit would have a 20% credit utilization rate. Ideally, this number should stay below 30%.

If that same person’s credit limit was suddenly dropped to $5,000, they would have a utilization rate of 40%. That could negatively impact their credit score.

How to Protect Your Credit during the COVID-19 Outbreak

Worried about how COVID-19 will impact your credit? First, check out our guide on How to Prepare for Job and Income Loss. Focus on smart spending and saving. Establish a maintainable monthly budget that doesn’t yield significant credit card debt. Keep an eye on your available balance if you chose to extend your credit limit during the pandemic. If it changes, be aware of your credit utilization rate and keep it below 30%. If you need to get a new credit card, make sure it’s the best credit card for your unique needs. Consider the rewards, interest rate, fees, and other features of each card before applying. Use our helpful Card Finder to get started.

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The information contained within this article was accurate as of May 8, 2020. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


About Heaven Speirs

Heaven Speirs is a contributing writer for She remains up-to-date with the latest developments in the credit card industry and the financial sector as a whole. Heaven has over 10 years of experience in online journalism, the bulk of which has been focused on personal finance. Heaven attended Oklahoma State University, where she discovered her talent for research and content creation. In her spare time, Heaven enjoys painting, playing poker, and spending time with her husband and three dogs.
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