More consumers getting turned down for credit cards, Fed says

New survey shows rejection rates for card applications and credit limit increases have risen since 2017

More consumers getting turned down for credit cards, Fed says

Consumers are increasingly being denied new credit card accounts and credit limit increases, according to a report from the Federal Reserve Bank of New York. 

The Fed’s latest Survey of Consumer Expectations Credit Access Survey, released Dec. 3, showed rejection rates for credit card applications and credit limit increases rose year-over-year in October 2018. Additionally, the number of consumer applications for credit cards has declined since 2017. 

In another potential sign of credit market tightening, more card issuers are shutting down customers’ accounts. 

The survey showed there was not a significant change in borrowers closing their own accounts between 2017 and 2018. However, the number of those who said a lender closed one of their accounts – most commonly a credit or retail store card – increased during the past year. 

In October 2017, 5.7 percent of people surveyed reported a lender-initiated closure event, and in October 2018, that number rose to 7.2 percent. This is the highest rate survey participants have reported since the Fed began the survey in October 2013. 

Card issuers often close customers’ accounts due to non-use, but an account can also be canceled due to a breach in the card’s terms or a change in the cardholder’s financial status.

See related: My credit score's 750! Why was I denied a card? 

Regarding consumers’ thoughts about their future expectations, the number of participants who said they are somewhat or very likely to apply for credit over the next year did not change significantly from 2017 to 2018. Respondents expressed pessimism, however, regarding their chances of getting their credit card limits increased in 2018, compared with 2017. 

The Fed fields the survey on a quarterly basis and provides details on “consumers' experiences with and expectations about credit demand and credit access.” 

Here are some more survey results at a glance:

  • Application rates for credit cards increased from 26.0 percent in June 2018 to 30.6 percent in October 2018, and the number of credit card limit extension applications rose overall in 2018. 
  • The number of participants who said they’re likely to apply for at least one type of credit over the next year is at its highest point since 2016, increasing from 26.5 percent in June to 27.5 percent in October. 
  • The number of respondents who thought their credit applications would be rejected over the next 12 months went down in October (from June) for all types of credit, with the exception of mortgage loan and refinance applications. 
  • Consumers’ expectations of having their credit applications rejected dipped slightly for 2018 compared with 2017 – with the exception of probable credit card limit extension request rejections, which increased.

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Updated: 02-23-2019