PaymentsJournal
No Result
View All Result
SIGN UP
  • Commercial
  • Credit
  • Debit
  • Digital Assets & Crypto
  • Digital Banking
  • Emerging Payments
  • Fraud & Security
  • Merchant
  • Prepaid
PaymentsJournal
  • Commercial
  • Credit
  • Debit
  • Digital Assets & Crypto
  • Digital Banking
  • Emerging Payments
  • Fraud & Security
  • Merchant
  • Prepaid
No Result
View All Result
PaymentsJournal
No Result
View All Result

Risk Management 101: Tighten Open Credit Card Lines

By Brian Riley
October 29, 2018
in Analysts Coverage, Credit
0
1
SHARES
0
VIEWS
Share on LinkedIn
credit risk

credit risk

Here’s something scary before Halloween.  This morning’s WSJ reports on the tightening of credit card lending standards, “an unusual move in a strong economy that may signal longer-term concerns”.  You heard it here first, albeit months ago.

  • Capital One Financial COF -2.85% and Discover Financial Services DFS -7.92% said last week they have become more cautious in how they’re handling credit limits.
  • The two lenders said they don’t currently see signs of deterioration in consumers’ ability to pay their debts but do question how much longer the economic recovery will last.

Smart consumers might want to accelerate their winter holiday purchasing before other issuers follow Capital One and Discover.

  • Capital One and Discover are gauges of many Americans’ ability to handle debt. Discover generally doesn’t market to affluent customers, and Capital One has a large number of customers with less-than-pristine credit scores, making both companies a window into a part of the economy that is often the first to show cracks.
  • Some 33% of Capital One’s domestic card balances, for example, are owed by subprime borrowers, according to the bank.

First it is credit lines tightening.  Next, expect to see the underwriting function become more conservative.

This will slow down account growth, and what you will see in the credit card metrics is rapid deterioration in risk numbers, such as Net Credit Loss.  The nominator will decrease and the denominator will increase in this important metric.

  • Separately, Discover has shut down inactive credit cards totaling nearly $30 billion in spending limits over the past two years. The effort is in part aimed at lessening the chances that credit cards that have been abandoned in sock drawers or elsewhere will suddenly start being used by cardholders if they become desperate for credit.

Watch for trends in Mercator Advisory Group’s soon-to-be-published 2018 databook.  Here is a link to last year’s version where we discuss contingent liability, which is the metric that covers this very subject.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

1
SHARES
0
VIEWS
Share on LinkedIn
Tags: Capital OneCreditCredit CardsDiscoverRisk

    Get the Latest News and Insights Delivered Daily

    Subscribe to the PaymentsJournal Newsletter for exclusive insight and data from Javelin Strategy & Research analysts and industry professionals.

    Must Reads

    digital euro

    Can the Digital Euro Be the Difference Maker the EU Needs?

    July 15, 2026
    tap-to-pay

    Tap-to-Pay Gives Small Merchants a Big Advantage

    July 14, 2026
    cyber resilience

    Modern Cyber Risk Is Breaking Longstanding Security Assumptions

    July 13, 2026
    Merchants Real-Time Payments, swipe fees, BNPL

    How Software Turned Payments Into a Seamless Part of Commerce

    July 10, 2026
    credit union data, credit union technology

    Inside the Tech Shift Redefining How Credit Unions Operate

    July 9, 2026
    embedded payments

    What Embedded Payments Can Solve for Small Businesses

    July 8, 2026
    apple tap to pay

    Build Momentum Behind Zelle for Business

    July 7, 2026
    Accredited Payments Risk Professional

    The Growing Importance of Payments Risk Expertise

    July 6, 2026

    Linkedin-in X-twitter
    • Commercial
    • Credit
    • Debit
    • Digital Assets & Crypto
    • Digital Banking
    • Commercial
    • Credit
    • Debit
    • Digital Assets & Crypto
    • Digital Banking
    • Emerging Payments
    • Fraud & Security
    • Merchant
    • Prepaid
    • Emerging Payments
    • Fraud & Security
    • Merchant
    • Prepaid
    • About Us
    • Advertise With Us
    • Sign Up for Our Newsletter
    • About Us
    • Advertise With Us
    • Sign Up for Our Newsletter

    ©2026 PaymentsJournal.com |  Terms of Use | Privacy Policy

    • Commercial Payments
    • Credit
    • Debit
    • Digital Assets & Crypto
    • Emerging Payments
    • Fraud & Security
    • Merchant
    • Prepaid
    No Result
    View All Result