Americans in 3 States See Dramatic Drop in Credit Lines

As the holidays approach, many Americans are seeing a drop in their available credit lines.

Credit limits are set by credit card companies to keep customers from spending more than they can likely repay. New credit users often see smaller limits than experienced credit holders due to their history, but certain cities and states might see different limits based on residents' money habits.

Nationally, credit card debt skyrocketed to $1.2 trillion this year, but Mississippi, Wyoming and Louisiana residents saw the largest credit limit decrease from 2022 to 2023, a new WalletHub study found.

Meanwhile, those in Colorado, Utah, Alaska, Washington and Iowa saw the smallest decreases, the study said.

WalletHub analyst Cassandra Happe said Mississippi residents came in first on the list due to their low credit scores despite having the second-most sustainable credit card debt in America.

"Wyomingites have also seen large reductions in their credit limits due to their high levels of credit card debt," Happe added. "Louisiana residents, with slightly higher credit scores than Mississippians, have experienced a greater increase in credit card debt and have secured the third-largest credit limit decrease this year, on average."

Wyoming had the eighth-least sustainable credit card debt in the country, WalletHub said, and the debt of households had increased by $605 on average.

In Louisiana, residents are braving the fourth-lowest median household income, which makes it increasingly difficult for them to balance their credit use.

"This could lead to a period of financial rebuilding for Louisiana residents in 2024 as they develop better financial habits with their reduced credit availability," WalletHub said.

Even beyond the specific states listed, Americans across the country are facing growing concerns as they prep to spend big this holiday season.

"In the current economic climate, Americans are facing shifted holiday spending habits, with nearly 60 percent feeling pressured to overspend," Marc Mezzacca, a savings expert at CouponFollow, told Newsweek.

Of those planning to use credit cards this holiday season, 26 percent expect to repay this debt over seven months, a new CouponFollow study found.

How To Handle a Lower Credit Card Limit

If you find yourself with a lower credit card limit than you hoped for, don't panic. There are many ways to get around it, and there are even some silver linings to not having a high credit limit.

"A credit limit decrease can pose a challenge, by making daily purchases less convenient, disrupting your cash flow, increasing your credit utilization, and hurting your credit score," Happe said. "But it may also be an opportunity to improve your financial habits."

For those with a smaller credit limit in place, they'll have to plan wisely to budget and pay their bills on time. But by using multiple cards for purchases instead of maxing out on one, you can spread out your balances and keep your credit utilization low.

"Asking for a higher credit limit can trigger a hard inquiry of your credit report, so if you need the best possible score in the next few months, you may want to avoid requesting an increase," WalletHub said in the study. "Consistently paying your bill on time and using only a portion of your existing limit can also lead to an automatic credit limit increase."

Most Americans using credit cards also have the option of paying their credit card bill several times a month to keep from reaching their limit.

"By actively managing your finances within the revised limits, you can not only mitigate the short-term effects on your credit score but also cultivate healthier financial habits for long-term stability," Happe said.

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