Capital One has dialed back the spending limits it offers. And Discover, according to the Wall Street Journal, has reduced the availability of balance transfers to people it considers higher risk.
For the most part, people who hold Discover and Capital One cards tend to be less affluent and more middle America, than, say, Chase Sapphire Reserve cardholders.
Warren Kornfeld, a senior vice president and lead analyst at Moody’s Investor Service, says concerns about the credit risks of Discover and Capital One users are noteworthy.
“They are very much a bellwether," he said, because they’d be among the first to get hit by an economic downturn.
That makes them a potential risk to lenders, according to Ted Rossman, an analyst with CreditCards.com.
“If you can only squeak through the door under the best case economic conditions, what happens if there’s a downturn ahead?" Rossman said. "What happens if you lose your job, or your hours get cut and your income goes down?”
Rossman said the economy’s pretty much at its peak right now. He thinks Discover and Capital One are making a smart move by reducing their exposure to risk.
“It’s really the 'ounce of prevention is worth a pound of cure' theory combined with the fact that good times can’t last forever,” he said.
Kornfeld said he wishes this kind of caution had been the order of the day among credit card issuers a decade ago.
“When you look at the trends going into the Great Recession, lenders were doing the opposite," he said. "And historically, when you have economic times as strong as they are today, then lenders loosen. And we have been voicing that concern over the last year or so.”
Cutting back on how much credit they offer doesn’t mean the companies are going into hibernation. Discover increased its ad buys by 50 percent for the first half of the year, according to data from Kantar Media. So you'll still be seeing their ads starring twins.
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