Credit Card limit reduced

DTHEP

My wife has had a credit card with Santander from last October 2012 with a £3000 limit on it, she was never missed a payment on this and always cleared the balance every month,she recived a letter to say they are reducing this to a £550 limit could any one explain how this works?:(

chattychappy

Often people experience this and there seems to be little rhyme nor reason. The following are possibilities:

1) She isn't using the account to anywhere near its limit - ie "too much unused credit facility"*. Something to do with compliance/responsible lending (or a misconceived view of the above!)
2) Something about the way she is operating other accounts with Santander.
3) They re-profiled her from CRA information - change of risk modelling etc
4) Business/marketing decision. They want to reduce their involvement in this market/sector/segment etc.
5) IT error/poorly thought out algorithm

Might be worth her getting copies of her credit report to check for errors.

It's all a bit of a dark art second-guessing these decisions. I hope she doesn't take it personally. The only time it's happened to me, I've had no problem getting new credit/limit rises elsewhere.

(* this is a popular theme here - that having too much credit available can prevent you getting new credit/cause limit reductions. Personally I think it's overplayed.)

DTHEP

chattychappy wrote: »

Often people experience this and there seems to be little rhyme nor reason. The following are possibilities:

1) She isn't using the account to anywhere near its limit - ie "too much unused credit facility"*. Something to do with compliance/responsible lending (or a misconceived view of the above!)
2) Something about the way she is operating other accounts with Santander.
3) They re-profiled her from CRA information - change of risk modelling etc
4) Business/marketing decision. They want to reduce their involvement in this market/sector/segment etc.
5) IT error/poorly thought out algorithm

Might be worth her getting copies of her credit report to check for errors.

It's all a bit of a dark art second-guessing these decisions. I hope she doesn't take it personally. The only time it's happened to me, I've had no problem getting new credit/limit rises elsewhere.

(* this is a popular theme here - that having too much credit available can prevent you getting new credit/cause limit reductions. Personally I think it's overplayed.)

Thank you
her spend on the card would be about £1,100 per month nowhere near the limit but it was cleared every month I take it if she was to get a credit report then speak to santander will it make a differance?

geekonthepc

It might make a difference but I'd see about getting a credit report first. Check to be sure that there's nothing unexpected on the report first.

If she's putting £1100 a month on it then clearing it, that shouldn't be of concern to Santander. However, they might just be seeing that she isn't actually paying much (if any) interest and therefore she might not be as profitable as Santander might have liked.

DTHEP

Thank you will get bak to you when she gets her credit report

shwetambarareddy

Also you can speak with the customer care for the information.......

jonesMUFCforever

This happened to me once with another bank - I phoned them up and we agreed on a reduction from £7k to £5k well within my monthly spend but giving me the just in case space.

DTHEP

Thank you I will get her to give them a call, it is very anoying that you have a limit and you stay within it and clear it every month you then receieve a letter to say your limt is cut out of the blue:mad:

matttye

DTHEP wrote: »

Thank you I will get her to give them a call, it is very anoying that you have a limit and you stay within it and clear it every month you then receieve a letter to say your limt is cut out of the blue:mad:

When you pay in full every month the lender doesn't make as much profit out of you as, say, someone who makes the minimum payment each month, or pays half of what they owe.

It may be that they decided she wasn't profitable enough.

[Deleted User]

matttye wrote: »

When you pay in full every month the lender doesn't make as much profit out of you as, say, someone who makes the minimum payment each month, or pays half of what they owe.

It may be that they decided she wasn't profitable enough.

I think this is very rarely the case, especially not with what we consider to be 'prime' lenders. They make their money on transaction fees. Certianly Amex, who are probably considered the 'prime-est' lender actually encourage you to pay in full each month.

I think the whole 'not making money from you' is likely to be more of an issue with sub-prime lenders. The give much lower limits and therefore aren't going to make so much on transaction fees - instead they make their money on charging ridiculous APR and charges. In their case I very much expect that people defaulting/missing payments and carrying a balance is an integral part of their business model.

To the OP, check your credit reports if you like, it's not going to do any harm but don't feel like you need to wait and see them before speaking to Santander. Call them up, ask why the limit was reduced and if they will reconsider and if they say no, tell them to stuff it and get a different card that is going to benefit you more. What's the point in keeping a card that doesn't allow you do do your normal £1k monthly spend on it? If they agree to reconsider, make sure that they give you more than what you need as it often doesn't look good to be spending right up to near the limit.

matttye

Lazyloki wrote: »

I think this is very rarely the case, especially not with what we consider to be 'prime' lenders. They make their money on transaction fees. Certianly Amex, who are probably considered the 'prime-est' lender actually encourage you to pay in full each month.

I think the whole 'not making money from you' is likely to be more of an issue with sub-prime lenders. The give much lower limits and therefore aren't going to make so much on transaction fees - instead they make their money on charging ridiculous APR and charges. In their case I very much expect that people defaulting/missing payments and carrying a balance is an integral part of their business model.

Very true!

Just thinking there must be SOME reason for the reduction. If she never hits the limit and repays in full every month they surely can't be too worried about her not paying the money back.