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The nation's five largest credit card issuers reduced aggregate consumer credit card lines by $480 billion, or about 15%, between last October and July, primarily by closing inactive accounts, according to a new Moody's Investors Service report. But during the same period, the nominal credit line available to the average credit card borrower actually increased, Moody's says. By closing inactive accounts with lower-than-average credit lines, the average credit line among remaining active consumer credit card accounts rose, Moody's researchers say. Moody's analyzed data Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp. and American Express Co. have submitted to the U.S. Treasury Department since last October as part of their participation in the Treasury's Capital Purchase Program. Since late 2007, Citi has reduced the number of zero-balance accounts in its bankcard trust by more than one-third, lowering the overall proportion of zero-balance accounts to 48% from 57%. Although AmEx has reduced overall consumer credit lines since last October, over the past four years credit lines on active accounts have risen. The proportion of credit card accounts in AmEx's trust with credit lines in excess of $25,000 grew to more than 20% this year from 5% in 2005, Moody's says. Though closing inactive accounts is a "prudent and easy" way to reduce exposure to potential losses, the overall effect of the largest issuers' credit cutback "is not as dramatic as the headline-grabbing billions suggest," the researchers conclude.
