Confused.com’s Stephen Jones asks whether credit card companies are acting in their customers’ interests when they cut borrowing limits.
Ever since the credit crunch hit almost exactly three years ago, there have been a wealth of stories about borrowers who’ve been shocked to discover their credit limits cut ruthlessly by their banks.
I was reminded of this when reading an article in The Observer last weekend. It told the story of a Lloyds TSB customer of 29 years, who found his limit cut by almost £11,000 after a lost cheque meant he missed one payment by a few days.
Coincidentally, this came very shortly after he switched £10,000 from his Lloyds card to an MBNA card offering an interest-free balance transfer. Lloyds denied that this had anything to do with their decision – the bank said the missed payment simply triggered a review, where they decided to reduce the limit – and has since restored the customer’s original credit allowance.
There is, of course, all sorts of pressure on banks and credit card companies to reduce their outlay, with the regulatory fallout from the financial crisis, not to mention the changes to the allocation of payments due to come into force at the start of 2011. Nonetheless, it still begs the question of whether credit card lenders have become unreasonably quick to reduce their borrowing limits when given the slightest excuse.
So I’m interested to hear from you – have you had your credit limit cut in recent years? What sort of impact did it have on you – and what explanation, if any, did your lender give?
Let me know your stories by commenting below or emailing me at stephen.jones@confused.com.
I have just been on phone to Bank of Scotland to ask them why my credit limit was cut from £14,000 to £7500. I was informd it was because I had missed the last two payments on my credit card. I was astonished at this.Never missed payment in 8 years
I then realised that the two payments they were talking about were not missed, but had arrived late.
In July the 6th to be exact we had to fly down to Luton as my sister in law was diagnosed with lung cancer. While in Luton I went to Lutons Mall(Arndale centre) and went to a Halifax branch to pay this bill £400. The cashier took my money and was about to process transaction when she was advised that they could not accept payment for Bank of Scotland gold card. I then went to Nationwide Building society of which I am an account holder and they would not accept payment. My husband and I returned to Scotland on 9th July and immediantly went to Bank of Scotland branch in Clydebank and paid account and got branch to email head office to let them know circumstances. August came and we had not received statement we phoned and asked that they send statement so that we could pay Augusts amount.They stated they would send statement. No statement arrived we phoned again( tried to pay by debit card) and by time statement arrived, payment was due that day. I phoned credit card company and was told we would be refunded for the two late payment charges but my credit limit would stay at lower amount. My credit rating will be reduced because they have not changed my details that they were not missed payments at all but problems that they had created themselves. I think I should write to ombudsman at Financial Authority
Posted by: Mrs Sheena Mulholland | 31/08/2010 at 07:57 PM
A few years ago, Asda offered a credit card which offered a discount on their vehicle fuels if you paid for them with it. I took the card out for this reason, never missed a payment and in fact kept it pretty well paid off all the time I had it, which was a couple of years, and all through this time I mostly bought diesel from Asda. The card was issued by Capital One but last year the card operating company changed to Santander who promptly reviewed what I was doing with the card and slashed the credit limit from £3000 to £200, which made it fiddly to use and effectively useless. By then the cheap fuel discount had ended, so I paid off the card and told Santander to close the account, which they said they did, but since I continued to get statements for the supposedly dead card, this was obviously not the case. It took two more increasingly annoyed phone calls over the next six months to finally get them to close the account and explicitly say so by post.
In retrospect, I don't really blame them. They weren't getting anything much off me for the use of the card; no big outstanding amount on the card meant no interest payments to charge and no revenue for them; effectively I was (and always had been) a non-profitable customer for them, though Asda probably quite liked me. However I would have greatly preferred a letter explaining this and giving a choice between paying a fee for the card or closing the account. Instead, making the card effectively useless is annoying for me and gets them a bad name when I inevitably pour out my grievances on-line; inefficient customer service following my acceptance of the inevitable merely adds a final kick in the teeth to the whole thing.
So, Santander: probably not at all friendly if you're not making them any money, and certainly rather poor with the customer service.
Posted by: Dan H. | 31/08/2010 at 09:09 PM
I had a similar experience with my ASDA card - the limit being reduced from £1000 to £350 for no apparent reason. I only used the card for ASDA internet shopping saving me delivery charges so a limit of £350 barely covers 2 shops! I also settled in full monthly.
I too was tempted to tell Santander what they could do with their card but decided to hang on to it and use it sparingly, costing me zero and being a nuisance customer to Santander.
Apart from anything else it is bad publicity for ASDA.
Posted by: John Craner | 01/09/2010 at 10:01 AM
I think what happened to me a couple of years ago was very shocking and I wish someone would make Co-Op accountable for it.
I had a Co-Op credit card for 20 years and had never missed a payment. I had built up an excellent credit limit of £20,000 but only carried a balance of about £1500 on it. I used to think that credit limit was my security for any emergencies.
Then one day a couple of years ago I went into a branch of the Co-Op that had just opened up where I lived to make my monthly payment. The manager asked me if I wanted to take out one of their new credit cards and I said no becuase I had had my existing card for 20 yrs and had built up a generous credit limit in that time and therefore didn't see the need for another card. The manager's reaction instantly became very cold towards me because I wouldn't take out one of their new cards and he said credit limits can be cut at short notice you know. I immediately felt that I was being blackmailed as a threat that if I didn't take out a new card with them they would punish me by slashing my credit limit on my current card so i quickly left the bank.
Sure enough a week later I had a letter from them saying they had wiped out ALL my credit limit leaving me with a card that was of no use to me at all and it then looked on my credit file as if I had maxed out my card as there was no limit left on it.
Posted by: Elaine M | 01/09/2010 at 11:02 AM
i was with lloyds tsb with a gold account for several years my credit was excellent i had a 15000.00 limit which was great i paid it regularly no probs. in march 2005 i had a heart attack at the age of 35 a year later i had another and a stroke which thankfully i recovered from. as i was off work for a while i got into a bit of money trouble lloyds bank wrote to me to say they had looked into my file and had reduced my limit to 300.00 what a bank thanks lloyds tsb its no wonder we are all in a mess
Posted by: kay | 01/09/2010 at 11:34 AM
I have a Thomas Cook Credit card. They have taken away all the benefits to having this card. In April I rang to pay my balance and thought I had misheard, the message said your credit limit is £990.00 my limit was £4500.00 so I rang up. I was told that a letter was going to be sent. I questioned why my limit had been reduced and they politely told me that I had paid interest two months before this was the first time I had paid interest as I was waiting for a friend to pay off an amount that I had paid on his behalf. So I informed them that the card was of no benefit to me as I only used it to book Holidays through Thomas Cook and would therefore take my business else where. The response was do what you like so now I have a Gold Card with my Bank with a Higher Credit limit and no faith in Thomas Cook at all.
Posted by: Lesley Glover | 01/09/2010 at 12:34 PM
I have a CitiBank credit card and also a GM card,had both for years. Recently I went to the States and was going to be there for about three months.I don't have a DD set up with my bank as I always paid my account when I received my paper statement.Rather than ignore the problem I telephoned both companies and told them that I was abroad for at least three months and that I wanted to go to online statements,I was refused and told I had to have paper statements.I have other cards and was able to switch to online billing no problem.Anyway the result was I was late on payments to both companies as I paid the usual amounts but they arrived after the required date.I contacted Citibank who said that I had paid too early and not in response to a statement so the amount I had paid was seen as an additional amount and I therefore still owed them.After many years with these companies I intend to close the accounts within the next two/three months.
Posted by: Barry Atkins | 01/09/2010 at 12:52 PM
I have just transfered the balance on my Virgin credit card to another card that had offered me 0% interest on balance tranfers for 12 months. I naturally took up the offer. A few days later Virgin wrote to me saying it had put up all the interest rates on my account. A few weeks later I went to use my Virgin credit card and it was declined. I was puzzled as I had a credit limit of 3000 pounds, and knew that I had a balance of only about 400 pounds. I went on-line to check my account and found that Virgin had also decreased my limit from 3000 to 500 pounds without prior warning.
Posted by: Louise Cartwright | 01/09/2010 at 09:32 PM
Lloyds TSB cut my credit card limit from £6,250 to £1,000 - because I had not used my card in 6 months.
They didn't even bother to tell me until they had done this. I have been a loyal customer of theirs for 30 years and have never been in trouble with my banking.
When I asked them to please review their decision because the card would have been used in the future I was told no, their next review of my account would be in 6 months time!
Posted by: Peter | 08/10/2010 at 10:54 PM
Same old story - I was a loyal customer of Halifax - had all their current and savings accounts and their credit card. My credit limit had risen over the years to around £15,000. I had a couple of expensive holidays and had around £6000 on it but came into some money and paid it off. A week later received a letter saying my credit limit had been reduced to £950 because the bank was trying to be a 'responsible' lender. I closed the account immediately and tell this story to every counter staff who tries to get me to sign up to a new credit card with them every time I am in the bank doing business.
Posted by: cthrushell | 26/10/2010 at 02:21 PM
Im 19 right now, I manage my money well.I have had a barclays current account for 3 years now. I was eleigible for a barclaycard platinum credit card a year ago, so I thought why not? I was a student after all. I worked part time in the supermarket so I guess they thought I was low risk. My credit limit was £2000 and I never missed any payments and paid in full as ssoon as the bills came. Anyway just for fun I applied to have my limit increased, and they increased it to £3000!! I was pretty shocked. Just shows that not all banks are lowering credit limits ruthlessly.
Posted by: abzy | 14/02/2011 at 11:40 PM
Hi, i`ve had my lloyds card limit cut from 2550 to 750 because i kept getting the minimum payments wrong, one was 21 pence short one 28 and the last one 2.30 all classed as late payments, didn`t help that they put my interest rate up from 20% to 30%!! Ok so it`s my fault i hear you say, well this time they dropped my credit limit to below the amount i owed, so now they are saying i have exceeded credit limit. Lloyds customer services are non existent (unless your a buisness customer) so i am moving to the only (semi) ethical bank out there the co-op/brittania. Also with co-op i can ring my local branch and speak to someone i know instead of some jobsworth in indian call centre.Rant over.
Posted by: Mr D begley | 26/03/2011 at 11:25 AM
Hi Received a letter from Santander saying that my credit limited has been cut from £1100 to £500.00, with no real explanation, never missed a payment, always pay the total amount off even before its due date, I also have my mortgage with then which is not in any arrears, so i've now closed my account!!!
Posted by: Stephen | 10/06/2011 at 12:37 PM
I laughed with delight at the ad campaign when I spotted it yesterday. Not my style, but totally get what he was going for, and thought there were some interesting fashion ideas that I wouldn't expect from this line. The campaign (some images more than others) remind me of Kate Spade ad campaigns of past. Remember the one with the preppy NYC girl visited by her preppy family? This feels similar but a bit off. Though I did post the intro image with the jeep full of stuff on my wall. Thanks for sharing!
Posted by: Christian Louboutin Outlet | 31/08/2011 at 03:02 AM
It has been such a glorious summer with the nice weather. Made yesterday's heat and humidity even that more unbearable. I cross my fingers that we have an early autumn!!!
Posted by: True Religion Jeans | 15/09/2011 at 09:44 AM
Santander/Paypal recently cut my credit limit from 3000 to 1550 which was exactly what I owed Hmmmm I have a mortage with them also not for much longer Ive just paid of the card and will move mortage as soon as it possible and wil NEVER give Santander my business account NEVER EVER lets hope Im not the next Richard Branson Eh !!!!
No explaniation except call equifax I call them and it takes three days for them to allow me to discuss the situation with them seems we are not clients we are just piggy banks for the BANKERS !!! to breakwhen they want Im going back to the matress and biscuit tin method Stuff the greedy self centred Bankers they are the scum of the earth !!!
Posted by: Jim Gourlay | 14/11/2011 at 11:28 PM
Well like most I have been with LloydTSB for 37 years, every wage I have earned has gone into my account. I even have a loan with them, paid by DD, so never missed a single payment. I have a credit card, limit for 10 years was £3700, 3 months ago they upped my limit to £4700! for being such a loyal customer. I had £2000 on the card, and never missed one payment, always paid 2-3 days after recieving my statment. To be told today! that my limit had been reduced to £2000 with no explinations. So effective making the card usless to me for any emergency. Thing was my payments had been bringing my balance down! TSB I can now get a loan from Sainsburys of all people, to pay off everything at a lower rate! and lowering my monthly DD's bye bye TSB Customer service shocking...they just don't want to know.
Posted by: Big Dave | 17/11/2011 at 10:38 AM
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