Barclaycard customers facing credit limit cuts caused more confusion

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Barclaycard customers whose credit limits were reduced by 95% faced even more confusion, after mistakenly learning that the new limits were based on their average balances over the past two years.

Several customers, many of whom have perfect payment histories, told This is Money that they were told the cuts were based on average spend, rather than the maximum balance they had accumulated.

This would mean that those who only used their card for occasional large purchases like vacations to benefit from higher consumer protections would end up with a limit that would not cover them.

Some 100,000 Barclaycard customers face huge cuts to their credit limits

For example, someone who has spent £ 2,000 a year on a family vacation and has not made any other purchases on the card, could end up with a credit limit of as little as £ 166 if their average balance is was used to calculate it.

Meanwhile, consumer spending has fallen dramatically over the past 13 months due to the pandemic and several lockdowns, with billions of pounds being wiped out of credit card balances.

As a result of the discounts offered by Barclaycard, some customers are faced with spending limits as low as a few hundred pounds, which in some cases are expected to be reduced by as much as 99%.

This is Money has received over 450 emails regarding the impending cuts since last Monday, with many longtime customers angered by the proposals and cutting up their Barclaycards in protest.

The credit card company has categorically denied on several occasions that average balances would be used to calculate new credit limits.

However, several customers have told This is Money that this is the explanation given to them by its customer service.

Louise Porter, 42, of Hampshire, whose limit is to drop from £ 11,900 to £ 1,650, received a letter dated April 19 last week.

Louise Porter learned that the cuts were below her average balance over the past 2 years.  However, Barclaycard has denied making any cuts on this basis

Louise Porter learned that the cuts were below her average balance over the past 2 years. However, Barclaycard has denied making any cuts on this basis

He said: “Your future credit limit will be £ 1,650, the reason we chose this amount is because when we checked your average balance over the past two years, it was slightly lower than this amount.”

Louise previously told This is Money that she used the card for large one-time payments and then paid them back over the course of a year.

She added, “Their criteria for using the average balance is stupid, surely they should look at the highest balance. I don’t understand their logic, or lack thereof.

Some have reported similar experiences. Mark Uffindell, another who wrote to This is Money, said: “I was recently informed by Barclaycard that they are reducing my spending limit from £ 8,000 to £ 400.

“The reason given when I contacted them was that £ 400 was my average spend with them.

Your future credit limit will be £ 1,650, the reason we chose this amount is because when we checked your average balance for the past two years, it was slightly lower than this amount.

Letter from Barclaycard to Louise Porter, April 19

“My average account is between £ 1,200 and £ 3,000 per month. The proposed facility would not pay my monthly fuel bill.

He added, “Like many clients, I have direct debit to pay the minimum required payment each month, although the full amount is usually paid monthly before this facility kicks off.

“I am, again, I think, like many other customers, looking for an application for another card. I feel dumped and I’m afraid I will have to spend some time now looking for other arrangements.

A third customer, Daniel James, is seeing his spending limit reduced from £ 12,500 to £ 2,200, which he described as a “slap in the face” and was initially below his current balance.

He said: “I complained about this and then was told they calculated on average how much a customer was using on their card.”

The move means more confusion for around 100,000 customers who are already struggling to understand Barclaycard’s rationale for the proposed cuts, which it has pinned on affordability concerns amid the coronavirus pandemic.

We reported last week that the company, which together with Barclays debit cards accounts for almost £ 1 in £ 3 spent in the UK, appeared to have taken a unique approach to borrowers.

Some, including Louise, were told they had to provide details of their income, which in many cases has stayed the same or even improved in recent years, to keep their old credit limit, but were also told that the company had never verified their financial situation. situation. The company denied this.

What can you do if you are concerned?

Those affected by the elimination of Barclaycard credit cards fall into two categories. There are those who have been told they can appeal the decision if they provide the bank with up-to-date information on their income, and others who cannot.

For the first group, it’s pretty straightforward if they want to try and keep their Barclaycard limit. They can write to the bank and explain why the decision should be overturned and their old limit returned to them.

However, there is no guarantee that this would be successful.

For the latter, they can either accept the decision and keep a card with a lower credit limit, or go elsewhere.

Some Barclaycard customers have been told they can appeal the decision to reduce their credit limit if they send proof of income

Some Barclaycard customers said they could appeal the decision by sending proof of income

If they want to go somewhere else, the best thing to do first is to either clear their Barclaycard balance or transfer it to an interest-free balance transfer agreement, with terms of up to 29 months. However, there is a charge for transferring a balance.

The best deal available in our guide, Virgin Money, charges 3% of the amount of money transferred.

If someone wants to apply for a new card, they should first check their chances of eligibility.

The likes of ClearScore and Experian offer this, allowing applicants to see how accepted they would be for a card without making a formal request that appears on a credit report.

Experian also offers a service for certain card providers that allows applicants to see if they will get a credit limit high enough to cover their balance transfer, which given what happened with Barclaycard may be worth it. worth checking out.

Sara Williams, debt advisor who runs the Debt Camel blog, added: “So many clients have had their limits reduced that Barclaycard does not appear to be specifically targeting people in financial difficulty.

“But some affected people will struggle. If that’s you, this is a good opportunity to talk to a debt counselor like StepChange about your options – freezing interest on credit card debt could take the pressure off considerably. ‘

She added: “If your limit had been stupidly high before and this has caused you a lot of trouble over the past few years, you might have good reason to file an affordability complaint and ask for the interest you paid back. you paid. “

As a result, This is Money called on the company to reconsider its cuts for those whose finances have remained stable.

However, those whose new limit is higher than their maximum balance in the past two years cannot appeal the decision.

After reviewing Louise Porter’s case, he told This is Money that she was given a bad explanation “due to human error”. Instead, he said his new limit was “based on a personal assessment of affordability” and apologized.

A spokesperson said: “I can confirm that Barclaycard does not use average customer balances to calculate limit drops.

“For some customers, their new limit is higher than their maximum balance over the past two years, which means they should be able to continue using the card the same way as before.”

They added, “We have a duty of care to our clients 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.

“If customers think they can afford a higher limit than what was communicated, we ask them to contact us so that we can reconsider our assessment. We are extending the time customers have to provide this additional information until the end of May and will not reduce any limits before that date.

“Customers can reach us by contacting us using the contact details provided in our correspondence with them. “

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