Even as Credit Limits Tighten, Card Balances Continue to Grow

Credit Limits Rise More for Those With Good, Very Good Credit

Another way to observe how consumer spending trends have changed is by looking at credit scores and their effect on spending power. For example, Experian data shows that those with fair credit scores (580 to 669, as measured by FICO) received credit limit increases that were hundreds of dollars less than the average increases extended to those with good and very good credit scores (670 to 799).

Average Credit Limit Change in Dollars, 2022-2024

How FICO Scores Inform Your Credit Limits

Lenders don’t only look at credit scores when deciding how much credit they’re willing to extend to their borrowers, but it’s fair to consider it as major a factor as income in their determination.

The data below also shows how the decision of how much credit to extend is still largely a function of two inputs: credit score and economic conditions.

While in 2023 banks and other lenders were still extending credit liberally—witness the double-digit percentage jumps in credit limits that year for those with less-than-good credit scores—in 2024, credit limits were curtailed across all credit scores. Consumers are receiving enough of a credit line increase to keep up with the rate of inflation, but little more.

Average Credit Limit Increase by Score Band, 2023 and 2024

Those with FICO Scores below 740, and especially below 670, are still revolving more in credit card balances than they are receiving in new extended credit from lenders—consequently increasing their credit utilization ratio. In general, a consumer with a good or better FICO Score has an average credit utilization ratio below 30% (in other words, using less than 30% of the all credit made available to them by lenders), while those with fair FICO Scores have an average credit utilization ratio of 61% as of June 2024, according to Experian data.

Higher Credit Scores Are One Path to Higher Credit Limits

New credit card spending and the additional revolving balances are leaving some consumers more squeezed than others. And as average credit card APRs hover near 23%, according to Federal Reserve data, interest charges make up an even larger percentage of statement balances than they did two years ago.

This is especially concerning for consumers on less secure financial footing, who may now be running short on discretionary income once all the monthly bills are paid. One bright spot: Unemployment rates are still relatively low (meaning that employed consumers still have ability to pay down their balances, at least in part).

Retailers have taken notice of consumer spending in recent quarters. Value meals have been reimagined to improve dwindling sales, big-box retailers are expecting a decline in sales, and inventories are beginning to pile up in the warehouses that supply those stores.

Nonetheless, elevated credit card APRs remain an issue for consumers even without any additional spending. Nor will anticipated rate cuts be much of a salve. Considering how quickly credit card rates climbed 5 percentage points since the first rate hike in 2022, a quarter-point or half-point rate cut will be barely perceptible.

For consumers with higher credit utilization ratios, reducing debt balances even slightly can mean an increase in FICO Scores, which in turn may open doors to much more cost-effective approaches to reducing remaining debt, such as through balance transfers and personal loans, which may otherwise be out of reach.