Barclaycard credit limit reductions – your rights – which ones? New
Barclaycard is reducing credit card spending limits for hundreds of thousands of customers from the end of May, with some customers facing reductions of over 90%.
The move comes less than a year after the provider sent letters to some customers apologizing for their excessively high credit limit.
Many customers have reported that Barclaycard is lowering their limit even though they haven’t missed any payments and have stable finances.
We heard from a client who told us his limit had increased from £ 12,500 to £ 250, although he claimed he had never missed payment in his four decades as a client.
Here, which one? examines why the provider is reducing credit limits and explains your rights if you have been affected.
Why is Barclaycard reducing credit limits?
Your credit card limit should be right for you. If you have a higher income and a good credit history, you should be able to borrow more. Typically, if your circumstances change or you fall behind on your repayments, your limit may be reduced.
However, regardless of your current situation, your lender or creditor can change your credit limit at any time, unless you have made a different arrangement.
Barclaycard says it is factoring in changes in the economy when making decisions to reduce credit limits, as this impacts clients’ “ability to effectively manage their loans.”
On this occasion, he said he had to take into account the current economic situation the impact of the coronavirus, and that this has resulted in an increase in the number of customers receiving credit limit cuts.
Barclaycard did not disclose exactly how many customers are affected, but in Twitter responses to customers it said it had to reduce the limits of “more than 100,000 customers”.
A Barclaycard spokesperson told Which ?: “We owe a duty of care to our customers to ensure that their credit limits are affordable so that they are able to effectively manage their borrowing. To assess affordability, we look at our clients ‘finances across their entire loan portfolio to make sure that we are lending responsibly and that they are not borrowing more than they can comfortably afford.’
What customers are saying about the change
Since Barclaycard’s announcement, there has been an outcry on social media, with many customers voicing their frustrations.
We spoke to a Barclaycard client Jon, a semi-retired TV producer who told us, “I have had a Barclaycard for 40 years and the monthly payments were always cleared from my Barclays account during that time. “Have never defaulted in four decades. I have over £ 300,000 in my Barclays account. Out of the blue, I was reduced to £ 250 on a monthly spend of £ 12,500.”
He added: “Barclays told me I cannot file a ‘complaint’. It’s not a word they recognize. They said I could register a ‘concern!’ I would have ditched the Barclaycard, but I travel a lot to third world countries where ‘Visa’ tends to be recognized rather than ‘Mastercard’ and where they also accept a ‘signed only’ card – mine is – when logins Internet are bad or non-existent.
Below is another review from a customer who was affected, with a 98% reduction despite claiming to have a good credit history.
@Barclaycard I reduced my 98% limit from 16k to 250. Perfect credit history and had the card a decade that was perfectly managed… used and paid off every month. No need to have the card now because I can spend it in one transaction #barclaycard
– Kate Lowery (@thekatelowery) April 15, 2021
I have been affected by the changes: what should I do?
If customers feel they can afford a higher limit than communicated, Barclaycard asks them to get in touch so that they can reconsider their valuation.
It says it is extending the time frame for customers to provide this additional information until the end of May and will not reduce any limits before that.
Customers can reach Barclaycard by contacting them on the contact details provided in his correspondence with them, he said.
You may also want to consider switching to another credit card provider. We have reviews from the top UK suppliers, which can help you make up your mind. Also see our Who? Suppliers recommended in our annual review of the best and worst suppliers.
How do providers set your credit card limit?
Credit card limits vary from provider to provider, depending on how they perceive your personal situation. When you apply for a credit card, the provider will set your limit based on:
- Your credit history: If your credit history shows that you are a reliable borrower, you will likely get a higher limit than if you have missed payments, are in arrears, or have Court of Justice (CCJ) judgments on your record. If you’ve never borrowed money before, this may also lower your limit, as the provider won’t be able to see your repayment records.
- Your cash: vendors typically ask you to disclose how much money you have left at the end of each month after your essential bills. The more money you have, the higher your limit should be.
- Your other loans: Any money you owe on debts such as mortgages, loans, and other credit cards will also be considered, along with any limits on any other credit cards you may have.
- Their loan policy: the credit limit your provider can give you may vary, as some providers may be more risk averse than others. Keep in mind that different credit card offers may come with different credit limit offers.
Some providers may increase your limit if they classify you as “good risk”. For example, if you’ve used your card responsibly and paid off your monthly payments in full. Although not all providers ask for it before doing so, sometimes you will be notified of your new balance once the change is made.
Does my credit limit affect my credit rating?
As long as you don’t increase your spending too much and keep your monthly payments under control, your credit score shouldn’t be affected if your credit limit is increased.
However, if a lender decides to reduce the credit limit on one of your accounts, your credit utilization rate – which measures how much credit you use against your limits – may increase, which may lower your credit score, depending on the credit. Experian referral agency.
So let’s say you have a limit of £ 12,500 on a credit card with a balance of £ 200, that would mean you only used 1.6% of the credit. However, if that limit dropped to £ 250, your £ 200 balance would mean you are using up 80% of the available credit, which could lower your score.
Credit scoring models and lenders also take into account your credit usage across all of your accounts to determine your overall credit usage, so if you have other credit cards with larger balances this may void the credit card. impact of a reduction in the credit limit.
How can I increase my credit score if my credit limit has been lowered?
If your credit score is low because a provider has lowered your credit limit, there are ways to restore it.
You can try to apply for a new credit card. Even if you don’t actively use this account, increasing your combined credit limit could have a positive impact on your debt ratio.
Keep in mind that if you are denied a new card, it will show up on your credit report and your credit score may drop further.
Alternatively, if you already have another credit card, you can request a credit limit increase from that provider.
According to Experian, over time reducing your credit usage rate can increase your score as long as you manage the additional credit responsibly.
Experian also suggests looking at your credit card spending. If you carry balances from month to month, you should try to pay off some or all of your debt to reduce your credit utilization rate.