Beware - Your Card limit may reduce suddenly

KizKizBangBang

Reducing your limit does make you much more likely to go over it. A few months ago I transferred a balance on to my Halifax card. After paying off about £200 a month or so, I was about £800 shy of my limit. Then they reduced it to about £50 over my balance! If I were to just pay the minimum payment (I never do this, but what if something came up and that was all I could afford one month?) the interest on top would take me over my credit limit. That's £12 extra to the Halifax and rubbish for my credit rating.

I think many lenders are moving the goalposts. Bank of England rates have gone up and if people aren't already struggling with mortgages etc, the banks are worried that they might do in the near future.

I'm trying to manage my debt but am stuck with cards with rubbish rates. I don't want more credit, just the ability to move things around, but it's proving harder and harder to get a good deal.

PJHilder

This thread has made me wary about paying off my Barclaycard this month in full like I normally do. As my due date is late in the month i'll do the 2 payments thing and see what happens.

housebuyer_abc

I agree with Dylanwig, that the frequent reduction of credit scores is infuriating and can cause problems.

However what really annoys me is the amount of posts that say (paraphased)...

I have a large balance on my account (i.e. I owe a lot), and then I pay in a few thousand to pay for a holiday or a car. Well excuse me, but if you are already in DEBT why are you going on holiday and not economising???? Talk about the want it now, "Because you're worth it" society we now live.

I genuinely understand the pain of issues like the poster who needed a blazer for the child, that one is hard.


Take it another way, if you owed your mate £5K, and were paying it off at a pitance a month, and then you turned round to him and said if I pay you 2000 quid can you go and buy me a holiday, how do you think he'd feel that you didn't think to pay him back first.

Also banks give credit based on risk. If you get a 5K limit its because they believe you are good for 5K, if you get another card with 5K, it doesn't change the fact that the first bank still assess that you can only afford to run credit of 5K. You are effectively misleading them as you haven't mentioned the extra risk they are now taking.

Has anyone ever considered saving for something they actually want? Its what I do, it meant for six years while everyone drovee round in a nice car I got the bus, while everyone else I knew went to the Maldives/Florida etc I went to my parents house in Wales. Now though I can buy these things with REAL money that I've saved, try it you might like it.....

joanna_c

GettingThingsDone wrote: »

A couple of points

1) CC company tactics - MacBoy is absolutely spot on. Basically they've got us hook, line and sinker. The urgency to get all debt off of credit cards has significantly increased.
2) Martin :money: may need to update one of his key pieces of advice - "is it better to pay off debt with savings?". The assumption is that you'll keep your credit limit and so if you need to borrow again, you'll have access to credit. However, if your credit limit is significantly reduced, you need to weigh up the price of having credit available (i.e. the interest you are paying on your balance) against the requirement for that credit facility.

Hope that makes sense to somebody!!

For example, If I have £10,000 in CC debt (at x%) and £10,000 in savings (earning y%), the current advice is to put the savings into the CC account thus saving me paying interest (at x% - y%) every month.

Again, under the current advice, if I then do need to spend, say £2000 in an emergency, I can use my cc card.

However, under the new rules my CC limit may well be reduced to a useless level e.g. £100 once it has been paid off with my savings. If I have an urgent need to spend £2000, I can't.

So now is it worth keeping a balance of £1000 on the CC, and £1000 in savings, as a cushion to handle emergencies (e.g. car blows up). Obviously this would cost (x% - y%) every month - so it's not cheap.

I don't 'do' overdrafts by the way but I imagine they (the banks) will start applying the same logic to them. i.e. as CC debt is squeezed down, it will start appearing in overdrafts. Banks won't want to be holding all of that if the economy starts faltering...

Sorry for the long-winded post, but the financial landscape is changing...

gtd

Indeed, GettingThingsDone, you've hit the nail on the head.
We can no longer use credit cards in the same way.
I have frequently taken a couple of credit cards as backup for emergencies when travelling abroad with young children and also as a spending facility.
This would not be responsible any more as the facility could be removed at any time.
The goal posts are being moved. We may complain, we may protest, take the moral high ground because, yes the fair, responsible thing for the lenders is to offer loans so that the borrowing is reduced gradually at an agreed rate.
BUT THEY'RE NOT. Because in economic crisis you still can't make an omelette without breaking eggs - and our accounts are the eggs.
Even if the lenders wanted to be nice and fair they're between a rock (or egg) and a hard place.
I too have been hoping to hear Martin's view, as it seems to me that these draconian credit reductions mean that now 'Cash is King' more than ever.
Instead of paying off credit cards - I am conserving as much cash as possible - just till it blows over - and it will !

Dylanwing

I mentioned buying a car - In my defence, it was simply easier as I bought it about 100 miles from home, and the money was in a notice account, so use a card and pay back once the bill came was convenient. I agree with much of the last 2 posts, and ultimately, I am better off paying money back on a low rate loan elsewhere than having a static debt with the Devil. Long term, not so good for the Banks as I will not be interested in holding a cc balance again.
My point remains that the blunt measures being used are not the best. If a Bank judges a limit too high, why can the Banks not be honest, and offer a loan to repay what is deemed excess borrowing. The customer benefits with (Hopefully) a lower interest rate, the debt actually being repaid and no nasty surprises. The Bank will have a reducing bad debt risk rather than a static balance. Or is practical long-term thinking beyond our wonderful Banks??

YorkshireBoy

Dylanwing wrote: »

If a Bank judges a limit too high, why can the Banks not be honest, and offer a loan to repay what is deemed excess borrowing. The customer benefits with (Hopefully) a lower interest rate, the debt actually being repaid and no nasty surprises. The Bank will have a reducing bad debt risk rather than a static balance. Or is practical long-term thinking beyond our wonderful Banks??

...because research and analysis tells them that (many of) those customers would simply go out for more credit elsewhere...witness the debt-free wannabe board, and the £20/40/40K of debt some people have racked up.

[Deleted User]

I do agree it's shoddy of the banks to go around reducing credit limits. But its not surprising given the credit squeeze and sub-prime issues. And annoying though it is, the banks would have to be really silly to give you a warning: "Mr Bloggs, we're cutting your limit this month so if you want to buy that expensive car you can't really afford, you have about 8 days in which to do so"...

Ultimately the banks don't have to lend their own money if they don't want to; the lesson surely is to ensure you have an alternative source of finance in the event you have a liquidity problem.

Dylanwing

...because research and analysis tells them that (many of) those customers would simply go out for more credit elsewhere...witness the debt-free wannabe board, and the £20/40/40K of debt some people have racked up.

Is this real research or just an assumption? Surely by randomly withdrawing a limit that is actually more likely to get people heading off for extra credit. I am sure that yourself and Jimster will be right in a minority of instances, but I actually think that the majority of people in the UK are far more sensible than you give them credit for.

Paul_Herring

Surprisingly, Halifax have just upped my credit card limit, from 4 1/2K to 6K, and I didn't even ask for it. (It's a 12 month 0% deal - I'm only paying minimum at the moment.)

[Deleted User]

Paul_Herring wrote: »

Surprisingly, Halifax have just upped my credit card limit, from 4 1/2K to 6K, and I didn't even ask for it. (It's a 12 month 0% deal - I'm only paying minimum at the moment.)

I asked Halifax a month ago for a limit increase, after reviewing my account they said if I continue to keep my account good I can have an increase in 6 months time (5 months now). :j