Barclaycard customers whose credit limits had been reduced by up to 95 per cent faced further confusion, after they were wrongly told the new limits were based on average account balances over the past two years.
Many customers, many with perfect payment histories, said it’s the money, and they’ve reported that discounts are based on average spending, rather than the maximum balance they’ve accumulated.
It could mean that those who only used their card for occasional large purchases like the holidays to take advantage of higher consumer protections would be left with a limit they didn’t cover.
About 100,000 Barclaycard customers are facing massive reductions in their credit limits
For example, someone who spends £2,000 a year on a family holiday and makes no further purchases with the card could be left with a credit limit of up to £166 if their average balance is used for their account.
Meanwhile, consumer spending has fallen substantially over the past 13 months due to the pandemic and multiple lockdowns, with billions of pounds of credit card balances cleared.
After Barclaycard’s proposed cuts, some customers are facing spending limits as low as a few hundred pounds, which in some cases are set to drop by as much as 99 per cent.
This is Money has received more than 450 emails about the impending cuts since last Monday, with many longtime customers angry at the proposals and cutting Barclaycards in protest.
The credit card company has flatly refused on multiple occasions to use average balances to calculate new credit limits.
However, many customers said This is Money is the explanation Customer Services gave them.
Louise Porter, 42, from Hampshire, whose limit is set to be cut from £11,900 to £1,650, received a letter last week, dated 19 April.
Louise Porter has been told that the cuts have come down to her average balance over the past two years. However, Barclaycard denied making cuts on this basis
“Your future credit limit will be £1,650,” he said, “and the reason we chose this amount is because when we checked your average credit over the last two years, it was just under that amount.”
Louise previously told This is Money that she used the card for large one-time payments and then paid them off over the course of a year.
She added, “Their standards for using the average balance are stupid, and they should certainly look at the highest balance. I just don’t understand their logic or lack thereof.”
Some have reported similar experiences. Mark Ovendel, another person writing to This is Money, said: ‘Barclaycard recently informed me that they are lowering my spending limit from £8,000 to £400.
The reason I gave when I contacted them was that £400 was their average expenditure with them.
The future credit limit will be £1,650, and the reason we chose this amount is because when we checked your average credit over the last two years, it was just under this amount.
Barclaycard’s letter to Louise Porter, April 19
My account average is between £1,200 and £3,000 per month. The proposed facility will not pay the monthly fuel bill.
He added, ‘As with many clients, I have a direct debit to pay the required minimum payment each month although the full amount is generally paid monthly before this facility begins.
I guess again I, like many other customers, am looking forward to applying for another card. I feel left out and made it clear that I should now be taking the time to find alternative arrangements.
A third customer, Daniel James, had 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 averaged out how much a customer used on their card.”
The move means more confusion for an estimated 100,000 customers already struggling to understand Barclaycard’s rationale for the proposed cuts, which have focused on affordability concerns amid the coronavirus pandemic.
We reported last week that the company, which, along with Barclays debit card accounts account for roughly £1 in every £3 spent in the UK, appears to have implemented a one-size-fits-all approach with borrowers.
Some, including Louise, were told they needed to provide details of their income, which in many cases had remained the same or even improved in recent years, to maintain the old line of credit, but were also told that the company had never checked their finances. . Situation. The company denied this.
What can you do if affected?
Those affected by the Barclaycard credit card culling fall into two categories. There are those who have been told that they can appeal the decision if they provide the bank with updated 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 discuss the reason for canceling the decision and returning the old limit to them.
However, there is no guarantee that this will 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 by sending proof of income
If they wish to go elsewhere, the best thing to do first is to either clear the balance from a Barclaycard or transfer it to an interest-free balance transfer deal, with lengths of up to 29 months. However, a balance transfer does not require a fee.
The best deal available in our guide, from Virgin Money, charges 3 percent on the amount of money transferred.
If someone wishes to apply for a new card, it is worth first checking their chances of eligibility.
The likes of ClearScore and Experian offer this, letting applicants see how likely they are to be accepted for a card without executing a formal application that appears on a credit file.
Experian also offers a service for some card providers that lets applicants know if they’ll have a credit limit high enough to cover their balance transfer that might be worth checking, given what happened with Barclaycard.
Sarah Williams, a debt counselor who runs the Debt Camel blog, added: ‘So many customers have had their limits lowered that Barclaycard does not appear to be targeting people in financial difficulty specifically.
But some affected people will struggle. If that’s the case, this is a good opportunity to talk to a debt counselor like StepChange about your options — freezing interest on credit card debt can relieve a lot of the stress.
She added: “If your limit was previously stupidly high and this has caused you a lot of trouble over the past few years, you may have good reason to complain about affordability and ask for a refund of the interest you paid.”
As a result, This is Money called on the company to reconsider the cuts it made for those whose finances remained stable.
However, those who have exceeded their new maximum balance within the past two years cannot appeal the decision.
He said This Is Money after considering Louise Porter’s case that it was given the wrong interpretation “due to human error”. Instead, it said its new cap was “based on a personal assessment of affordability” and apologized.
A company spokesperson said: “I can confirm that Barclaycard does not use average customer balances to calculate the limit drop.
“For some customers, their new limit is higher than their peak balance in the last two years, which means they should be able to continue using the card in the same way as before.”
They added: ‘We have a duty of care to our customers to ensure that their credit limits are affordable so that they can manage their borrowing effectively.
To perform an affordability assessment, we review our clients’ finances across their entire lending portfolio to ensure we are lending responsibly and that they are not borrowing more than they can comfortably afford.
If customers feel they can afford a higher limit than the reported amount, we ask that they contact us so we can re-review our rating. We are extending the time customers have to provide this additional information to the end of May and no limits will be reduced before then.
Customers can reach us by contacting us at the details provided in our correspondence with them.
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