Capital One has cut borrowing limits on its credit cards, a sign the lender may be bracing for the impact of the reduction in government unemployment aid.
The credit card issuer's customers took to social media to voice frustration about the cuts, with some saying the cuts have negatively affected their credit scores. A Capital One spokesperson said customers were informed in advance, but did not share how many accounts were affected.
"Capital One periodically reviews accounts based on a variety of factors and may make changes to existing credit lines," a spokesperson for the nation's third-largest credit issuer said. "In this case, our decision was based on customers' account activity over the last year. All credit limits were kept significantly above the highest balance of the past year to ensure that customers can continue to use the card as they have been, and provide flexibility for future spending."
Cutting borrowing limits is a common tactic amid high unemployment, Ted Rossman, an industry analyst at CreditCards.com said.
More than a million people applied for unemployment insurance last week, according to the latest data from the Department of Labor.
The country’s initial weekly jobless claims have declined since spiking in late March, but figures remain above historic highs, according to The Washington Post.
The Federal Reserve's most recent Senior Loan Officer Survey found 60% of banks tightened credit limits in the preceding three months.
"We saw the same thing during the Great Recession, when the Fed found 20% of banks cut limits on prime customers and 60% did so on subprime cardholders," Rossman said. "This is a common, widespread practice. Most card companies are doing it because they’re worried about risk."
The cuts to credit card limits come as the $600 in additional weekly unemployment benefits under the CARES Act, which was keeping some Americans afloat amid the pandemic, expired at the end of July.
President Donald Trump signed an executive measure this month creating the Lost Wages Assistance program, a temporary $300 weekly boost in jobless benefits using disaster relief funds.
So far, Arizona, Louisiana, Missouri, Tennessee and Texas are the first states to start processing and disbursing the aid, according to CNBC.