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Credit card limits reduced.
13 March 2009
Credit card companies have clawed back £5.29 billion in the past six months by cutting card limits, according to new research from MoneyExpert.com.
The independent financial comparison website says around 2.7 million customers have had their credit limit reduced, with the average reduction around £1,960.
The number of people to have had their card limit reduced is accelerating. In the six months leading up to March 2008, 1.8 million people experienced a cut. Card companies have also increased the extent of their cuts. Last March the average cut was around £1,600.
While almost forty per cent of reductions amounted to £500 or less and a quarter amounted to less than £1,000 just over ten per cent of all cuts equated to sums of £5,000 or more. Men were faced average cuts of £2,130 while women saw smaller cuts of around £1,790.
Sean Gardner, director of MoneyExpert.com, said: “Overstretched borrowers are seeing their credit lifelines withdrawn. With unemployment on the up card companies are looking to claw back debt quicker than ever before.
“It is not just those who have debt problems who are being targeted – there’s plenty of evidence that people with good credit records are being hit often because they don’t use their card enough as far as lenders are concerned.
“They say they are being responsible lenders by cutting limits which makes sense for them as businesses but the reductions can be a massive shock for borrowers many of whom are being entirely responsible.
“While limits could be cut at any point, anybody relying on a credit card needs to reassess their finances.”
In February 2008 card company Egg caused controversy when they slashed the credit limit of 161,000 customers. Since then other lenders have followed suit including Nationwide, Beneficial, Barclaycard, First Direct and SkyCard and others are assessing individual’s credit worthiness on a case by case basis.
There are still options for people looking to wind down their debt. Switching to a zero per cent balance transfer can make repayments more manageable. Both Abbey and Virgin Money continue to offer a fifteen month BT cards while a number of others offer twelve or thirteen month cards.
MoneyExpert.com offers a unique service which enables people to find the financial products which best meet their specific needs, and which they are more likely to be successful in being accepted for. It includes exclusive research conducted by MORI, which reveals providers’ service levels. This information is married up with a financial database which lists the products suited to the customer. For the first time, people can review a product’s price, features and also the level of service offered by the provider to enable them to make a more informed choice.
MoneyExpert.com aims to demystify the complex world of personal finance, and to help inform customers of the choices available. The service can be found at www.moneyexpert.com
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