A recent WalletHub report identifies Montana, Washington, and Minnesota as the nation’s top states experiencing the steepest decreases in credit limits over the past year. The study, covering Q2 2023 to Q2 2024, highlights the economic factors driving these reductions, including inflation and credit card delinquency, which have impacted credit access for consumers nationwide. Overall, credit limits fell in 42 out of 50 states year-over-year.
Source: WalletHub
Montana Leads in Credit Limit Reductions
Montana saw the largest credit limit decreases, with an average drop of around 15% over the 12-month period ending in June 2024. The state’s new credit card limits were over 11% lower in Q2 2024 than the previous year, ranking it 15th nationally for reductions on new accounts. The average limit on new credit cards in Montana was $4,794 in Q2 2024, placing it 20th-lowest in the U.S., with an overall average credit limit of $6,739 for the year—24th-lowest nationwide.
Washington and Minnesota Trail Closely
Washington ranked second on WalletHub’s study, experiencing notable credit limit cuts as of Q2 2024. Despite the state’s percentage drop being the 19th-highest, Washington residents faced one of the largest reductions in borrowing power due to initially high average credit limits. Washington’s top-15 ranking in credit card debt growth, along with increasing delinquency rates, also contributes to the tightening credit environment.
Minnesota ranked third, with an average credit limit reduction of 9% year-over-year by June 2024. New credit accounts opened in Q2 2024 saw nearly a 14% decrease compared to Q2 2023. Though credit card debt is growing at an above-average rate in Minnesota, the state’s low delinquency rates and high average incomes suggest a potential rebound in credit limits.
Economic Pressures Drive Credit Limit Adjustments
WalletHub analyst Chip Lupo explains that inflation, rising credit card debt, and delinquency risks are all factors contributing to these reductions. As inflation drives consumers to charge more on their cards, their credit utilization rises, increasing the likelihood of delinquency and leading issuers to adjust limits as a precaution.
Impact on Consumers
These reductions in credit limits reduce purchasing power for residents in affected states, potentially straining financial stability. WalletHub’s findings indicate a cautious approach by credit issuers, aiming to mitigate risks amid shifting economic conditions.
Click here for more on WalletHub’s study on the nation’s credit delinquencies.
