Beware - Your Card limit may reduce suddenly

taxi73

Well said...back to basics..I really do think that is the way forward.
Not to sound cheeky but the OP was saying that their credit limit had been reduced and couldn't understand this as they had been a very good customer but then went on to say they were going to reclaim charges from said card!!!....so they've obviously missed or been late with payments...so why wouldn't the CC company reduce the limit thus reducing the risk...
Did everyone think that there wouldn't be any backlash from financial institutions when people started claiming bank/cc charges back!!
I don't defend banks but at the end of the day they are businesses and have to make a profit and responsible lending seems to be needed as there are too many IVAs bankruptcies and DMPs...

Dylanwing

Taxi73 - just to clarify, I was a bit over-limit late last year, (awaiting expenses) but soon corrected it, and over the years I have had a few late payment charges, either postal delays or the letter being posted late. It won't be a mammoth claim, and I am doing that, and going to the Ombudsman with the main objective of annoying them and wasting their time. and resources. Any cash gain will be a bonus:beer: . I freely admit to problems in the past (2000/2001 - Ironically they raised my limit then!), but these are now behind me, and by budgeting properly, we are doing OK. If only we had been this sensible in the past.....

Regarding a 'backlash', Bank are a service industry, and without customers don't exist! Surely they should learn lessons and be more customer focussed, rather than just looking at new ways to annoy and screw their customers.

I will soon be credit card free, and probably a lot better for it. One day, Banks will wake up and realise they make more money from people like me than the clever dudes taking advantage of the 0% offers, then all the 'responsible lending' rubbish will be forgotten.

Robflh

Hi taxi73

I think you are kind of on the right track. I have five credit cards and all the statements for them. The APR on them now, is at least 2% more then it was three years ago. That means, we pay more in interest and less in charges, which is the backlash for people claiming back the charges.

If you have made late payments or gone over you limit or even missed payments, you are guilty of mismanaging you CC’s. Sorry but it is true.

In the past, I mismanaged my CC’s but I have never missed a payment. These days, as soon as I get my statement I write down how much credit I have available and then I take away from it any transactions that have taken place or that are going through. I also take away from the available credit the amount I will pay in interest next time, plus 20%.

This way, I will not go over my limit nor will I go close enough to it, that I will go over my limit once the interest has been added.

I ensure that at anytime, there is at least £200 in my bank account. That way as soon as the statement arrives, I can and do make my payment in a few days.

Therefore, I do not or tanks to Amex, I did not, have any black marks on my credit report but they still lopped £3,000 off my credit limit and I will come to that later.

Unfortunately, everyone that has not missmanaged their CC’s, are now having to pay more in interest because of all those who did and then claimed back the charges.

Over the last few years, the amount of unrecoverable debt that the financial institutions have to write-off each year has dramatically increased and the shareholders are not very happy about this. They of course have far more sway over them then we will ever have as an individual person.

If they reduce a person’s credit limit by 50% and that person was to get in to trouble, the CC company would loose 50 % less. If they do that to all their non-business accounts, they will reduce the amount of unrecoverable debt by 50% and that will save them millions or even trillions of pounds each year, which in turn will keep their shareholders very happy.

If I sold my house tomorrow I would be able to my off my mortgage, the debt on my CCs and still have a shed load of money in the bank. Therefore, my debt is not unrecoverable, so why have they reduced my credit limit.

When you apply for a credit card you will tell them what you income is and they will check your credit report to see how much credit you have been allocated.

They will multiply your income by a figure and this will tell them how much credit you can have. They then take one away from the other. There are other factors that they will take into account, like your credit rating.

Therefore, if the calculation says you can have £30,000 and you currently have £20,000 they will let you have a card with a limit of up to £10,000.

If at a later date, they decide to reduce the factor in the equation. This will reduce the amount of credit you can have. If the new calculation comes to £15,000 and you now have £25,000, the CC Companies will reduce the limit on your card/s until you have a maximum of £15,000.

Next time you apply for a new CC it will not matter how good your credit report is or how good your credit rating is or that you have enough equity to cover the debt, you will be turned down because you have more credit then the new calculation says you can have.

Unfortunately, doing it this way affects everyone regardless of how well you have been managing your CCs. That may not be very fair but there is little that we can do about it as individuals.

However, if we all boycotted one CC company because of it, and told them that is why. They would have to change their decision or go out of business and if you can get one to change their mind, they would all have to do so.

Dylanwing

Rob - Good post. The only slight problem is that I am learning to live without credit cards, and people like me are the profitable customers. They may reduce bad debts, but credit card profits will also drop as they are left with the more 'responsible' customers who manage their accounts properly.

Robflh

Hi Dylanwing

That is true but the loss for that reason will be far out weighed by the reduction in the amount of unrecoverable debt.

As they say, Swings & Roundabouts. What you loose on the swing is more then made up for on the Roundabout.

I would also like to say that I do not know for definite, if that is the reason why we have had our credit limit reduced. However, from what little I know and have seen or read, that is the only thing I have come up with so far, where all the pieces fall in to place.

taxi73

Hi there Rob...what a great reply...that's exactly the way I see it...there are a lot of factors and many firms are using new criteria..a while ago I was turned down for a CC from Tesco when I asked why..it was because I had loads of available un-used credit and nothing to do with bad payments or anything as I've never had a charge in my life!!
I applaud the companies now for seeming to be more responsible.They had a point as I had about £30,000 unused CCs on my file..so have now cancelled them all...can see the point as if I'd wanted to be really stupid I could've spent loads and gone bankrupt if I wanted too...it's all swings and roundabouts as you say...

Robflh

Hi taxi73

Thank you for that, it is always nice to know when an artist's work is appreciated. Just kidding.

Exactly, they gave people enough rope to hang themselves and when some people did just that, they were shocked by the level of criticism they received, for giving them too much rope in the first place. They are hoping that by shorting the rope they will prevent people doing it in the future.

However, in my case, I have been out of work for a long time and as it is impossible to live and run a home on benefits alone, I have over the years built up a debt of around £18,000.

Once I am employed again, I would be able to gradually reduce that debt but that assumes I would have a job again sometime in the future.

I did have an endowment mortgage (EM) but I used a company to claim I had been miss-sold an EM. The compensation money and the money I received for cashing in the endowment, gave me a lump sum of £6,500. This is normally paid off the outstanding mortgage and what ever is left, will be paid off with a new repayment mortgage over the remaining years of the original mortgage.

However, I kept the lump sum and the new repayment mortgage will finish a few years after the original one would have finished.

I could then use the lump sum and other cash I could get my hands on, as well as most of the available credit, to renovate my home. Then I could sell my renovated home and buy a property that is in need of some TLC. The difference in price between the renovated home I sell and the run down home I buy would be enough to pay off the CC debt (£28,000). Well that was the theory.

I am in the last stages of the renovation project and thanks to Amex, the available credit to finish the house has now disappeared. If I cannot find a way to finish the house off, I will have to sell it now and loose thousands of pounds in the process.

If I contact my CC companies and make arrangements to pay less or have the interest frozen, so I can finish off the house, I will have a big drop in my credit rating. This would result in them reducing the amount of credit I can have and I will not be able to renovate my new home.

I can understand what they have done and why they have done it but I was using my rope to pull myself out of the debt. All they have done is to cut a piece off the bottom of the rope. If I can find something to stand on, I will be able to reach the rope and continue to pull myself out of debt.

Ps. if you have so much in unused credit why did you need a Tesco card.

Dylanwing

TIME OUT CHAPS! What is happening to is, this is a consumer site, not a Bankers Love-in!
Who set the original limits? - The Banks
Who is happy to charge high interest rates when we use these limits? - The Banks
Who has changed policy? - The Banks
We hear of responsible lending, so who lent irresponsibly? - The Banks
For whose benefit are limits being reduced? - The Banks
Why? To allegedly reduce the risk to... The Banks
And what risk? A hypothetical one that we MIGHT default at some time in the future causing a loss to - The Banks?
I might pay money in for bills abroad and find my limit reduced and be stuck! The Banks say that is hypthetical, but so is the risk of default. The difference is?
I paid for my car on a Friday, collected it the following Saturday, my limit reduced in-between. The Garage only wanted a £300 deposit - Had I done this I would have lost the £300 and had a wasted 200 mile journey - Too close for comfort and less hypothetical.
Myself and Rob had unfinished work on the house - That's real, the Banks risk is hypothetical.
So, the Banks have caused the problem, the Banks want to change the rules, their risk is hypothetical, why should we suffer? Why should we take the risk? If they want us to reduce our limits, the card facility becomes a loan, not a revolving credit agreement and should attract lower interest.
Stop defending the shysters - They didn't care about my unfinished bathroom. They would not have cared about my car. So why should we care about their profits and possible bad debts?

Robflh

Hi Dylanwing

Just because I can understand, why Amex has dropped me back into the deep and smelly that does not mean I agree with them nor am I am happy about it.

When I sell my home I would like to, just out of spite, go for an IVA and pay a lump sum to all my CC companies, as a Full & Final Settlement. Amex would then get back less then half the amount I owe them. Unfortunately, that would also ruin my credit rating and I need credit to renovate my next home.

What I will do, as soon as I have sold my home and paid off my CC debt, is to cut up my Amex card and send it back to them. I may need credit for my next home but it will be a cold day in hell before I use an Amex card again.

True the CC companies may have set the original limits too high and for some of their customers, that was a mistake. What you and I have a problem with, is the way they are trying to correct that mistake.

Instead of doing it on a case-by-case assessment, they have taken the easy option, which affects customers irrespective of whether they are and always will be good customers or who will become or are currently, bad customers. That is not fair on us and many other loyal customers.

As for them not caring, they are a business and so long as it does not affect their Bottom Line, they do not have to care and as I said before, as individuals we cannot affect their BL. A Consumer Union could but I just cannot see that happening in my lifetime.

Dylanwing

Rob

Good post as ever. The problem with this issue is that each case is different, but if losses are incurred (As I nearly had), the Banks need to be pursued and fought hard to reclaim the money. As with Bank charges, maybe the T&C's are not as legally binding as they think. Eventually there will be a headline case, probably somebody stranded with kids, that's when they might have to be accountable. My chatges reclaim has just begun, no idea how much I have been charged over the last 6 years, but as a minimum I am looking for everything over the £12 OFT figure back.
My wife had a dormant account with just a few pounds in, we are now reclaiming that.
The Ombudsman Form is being done, claiming costs for calls to find out about my limit, and compensation for the embarrassment of a decline as they failed to notify me. Also claiming that as facility was effectively withdrawn, it is more like a loan and should attract lower rates. Because I asked questions about future intentions back in February and got evasive replies, it has an outside chance of working. As my main aim is to annoy them and waste their time, I can say that I am being successful!:j
And if they'd offered me a £300 limit increase to £750 and a tenner for my trouble, I'd have probably gone away quietly.