Angry customers took to Barclaycard after thousands had their credit card limits slashed – some by as much as 99 per cent.
One old customer, who has never missed a payment, said his credit limit had been slashed from £11,000 to £300, another saw it drop from £11,800 to £250, and in the biggest reduction he had seen so far a 62-year-old said year it’s reduced from £25,000 to £300.
Barclaycard is facing a customer service firestorm as it tries to advocate for taking the ax to the limits of loyal credit card customers, but has declined to say how many are affected.
Customers say they are offended and “disgusted” by the way the company has lowered its limits without a clear explanation, in a backlash that has gathered steam since This is Money and sister magazine Money Mail revealed it on Wednesday.
Barclaycard – part of Barclays – customers rounded it off after it suggested cutting the purchasing power of their credit cards by up to 99%
Customers say Barclaycard never checked their financial situation, which in many cases has remained the same or improved, but has lowered the limits to unusually low levels claiming that the pandemic may have affected their finances.
The credit card provider said an increasing number of customers have seen their credit limit reduced due to the ‘ongoing economic impact of coronavirus’ on the UK.
‘They obviously don’t want you as a customer’: Man slashes credit limit from £25,000 to £250
Mike Williams, from Surrey, says his credit limit has been reduced by 99 per cent with a cut from £25,000 to £250.
‘Barclaycard is someone who has arbitrarily increased the limit over time,’ said the 62-year-old who has been a customer for 28 years.
I hardly use it because there are no bonuses or benefits. When I went online to cancel the card they told you to call, but after 40 minutes I was still waiting so I gave up.
Williams said that if his income increased during the pandemic, and that he had no debts or loans.
He added: I think it’s the cheek. I was offended and then I saw what happened to others.
“You sit there thinking they obviously don’t want you as a customer.”
But customers who spoke to This is Money said they had not been affected financially by the pandemic, were “baffled” by the decisions, and had assured Barclaycard that it had no details of their earnings on file.
The latest proposed round of cuts was the second in the past 12 months, after it lowered limits for some borrowers last July.
But the latest drastic cuts have prompted a backlash from customers, some of whom have been with Barclaycard for decades, because in some cases their spending limit has been slashed by as much as 97 percent.
It was the money, said Diarmuid Ovathay, a client from Oxford: ‘My limit has been reduced from £11,000 to £300. I have been a customer for years and have never missed a payment. When I spoke with Barclaycard, no one was able to explain why, other than the usual “lender responsible” line.
“I closed the account and took out another card somewhere else instead.”
Another customer of the bank for more than two decades, who had previously seen his limit repeatedly increased to £8,500 without asking, suddenly saw it dropped to £1,000.
He was also told he could not raise his credit limit from £1,000 for at least four months because he had missed the March 31 deadline to spend some money after the letter informing him of his credit limit had been sent to an old address.
But he said: “The reasons given for reducing my credit limit to such a level are meaningless and seem contradictory.”
He added: ‘I’m told it’s due to the pandemic and people’s financial circumstances – although Barclaycard has never asked me about my finances and admitted they don’t have anything on file to say how much I earn.
Secondly, I was told the cut was too harsh as the limits were lowered depending on how many people had used the cards in the last two years.
Personal finance blogger Lee Silsby said his credit limit had been reduced from £16,100 to £500, a reduction of 97%.
You pointed out that spending during one of those years was lower due to people being ordered to stay home during the lockdown — and in fact, it would definitely be a bigger concern if people were spending more, and yet those people would be holding a higher credit limit.”
Lee Silsby, a client from Sussex, said his credit limit had been reduced by almost 97 per cent from £16,100 to £500, although he had never missed a payment and had never been denied credit.
“The £500 limit is useless as I usually buy holidays or electrical goods with this card to give me extra cover,” he said.
I might go ahead and cancel it. I had no explanation from Barclaycard and am a little disappointed to see this happen to so many people with good credit.
The £250 limit is not good enough for me to book a holiday or flights so I asked them to “pay their credit card”
Another customer told This is Money and MailOnline her limit was reduced from £11,800 to £250 despite never missing a payment.
The woman from Croydon, who says she’s been a customer for 41 years, said: ‘I’ve never missed a payment, always paid well in advance of the due date and always well over the minimum payment.
I was told over the phone that my account was marked dormant. However, I settled the entire outstanding balance two weeks before the payment due date and their letter lowering my credit limit followed a few days later.
The £250 limit is not good for me to book a holiday or flights so I told them to ‘pay their credit card and close my account’.
“I feel it’s a disgusting way to treat a loyal and good customer and I’m glad I don’t have a bank account with them.”
Barclaycard has confirmed that some customers will not be able to appeal the reduction to their credit limit because the reduced level was more than their highest balance at any point in the past two years.
Some Barclaycard customers have been told they can appeal the decision by sending proof of income
However, others, like 42-year-old Louise Porter from Hampshire, have been told the change can be reviewed if they send in either bank statements or payslips as proof of income.
Louise, from Hampshire, told This is Money her limit will be reduced from £11,900 to £1,650 next month, although she has never missed a payment in 20 years.
She said she felt her affordability arguments were “a smokescreen to get rid of nonprofit clients,” something she has repeatedly denied.
Instead, Barclaycard, one of Britain’s largest credit card issuers, cited the economic impact of coronavirus. Banks last year cut lending offers amid concerns about extending credit to those potentially unable to repay it.
A Barclaycard customer was told at the start of last month that his credit limit had been reduced from £8,500 to £1,000 after the bank repeatedly raised it without asking.
Its parent bank, Barclays, said income of its UK credit card division fell 24 per cent to £1.514 billion “as lower levels of borrowing and spending by customers led to a lower level of interest-earning lending balances”.
Ironically, the results of the survey published by the Bank of England on Thursday estimated the availability of unsecured credit such as cards and personal loans would increase between April and May.
Demand was also expected to pick up after declining in the first three months of 2021.
Barclaycard was one of several banks that increased its credit card terms generously by 0 per cent in recent months as lenders seemed to become more optimistic about the UK’s economic recovery from the coronavirus pandemic.
But the decision leaves borrowers, who will now have less purchasing power than they did before, with a twofold headache.
Lowering their credit limit means that any balance will now amount to a percentage higher than this new limit, which can damage their credit score.
Justin Pasini, CEO of credit screening firm ClearScore, said: ‘It is generally seen as a good thing if a person uses only a small percentage of their total credit limit because it shows they are not overly dependent on credit and are unlikely to max out on their cards.
“By lowering the total credit limit, this ratio can increase, which can have a negative impact on an individual’s credit score.”
Meanwhile, lowering the limit by as much as 97 percent impedes the ability to make large one-time purchases on the card, such as holidays, as the economy opens up.
A customer whose limit was reduced from £8,500 to £1,000, which was an 88 per cent drop, said: ‘I’d have no problem lowering my limit a bit, but the £1,000 limit is somewhat useless even if it was Just book flights for a family of four.
Some cuts look extreme. How many people want a minimum cost of cheap TV? You can’t spread the cost of the vacation over a year if he didn’t pay the maximum for the vacation in the first place.
Sarah Williams, Debt Counselor
“Some of the cuts sound extreme,” Sarah Williams, a debt counselor who runs the Debt Camel blog, told This is Money. How many people want a minimum cost of cheap TV?
“You can’t spread the cost of the vacation over a year if he doesn’t pay the maximum amount for the vacation in the first place.”
A Barclaycard spokesperson said: “As with many other lenders, our credit risk models take into account changes in the UK economy, as these changes may affect our customers’ ability to manage their borrowing effectively.
Over the past year, we have had to take into account the ongoing economic impact of the Coronavirus, and this has resulted in an increase in the number of customers receiving the credit limit.
Customers attacked the company on Twitter after finding out their limits had been lowered
Having updated credit risk models is part of our commitment to being a responsible lender, to help ensure that customers do not borrow more than they can comfortably afford.
For some customers, where we do not believe their current limit is affordable, we provide information on how to appeal the limit change by checking their income.
“When we reduce a customer’s credit limit, we will not reduce it below their current balance, and we will ensure that they have at least enough space in their account to continue basic spending.”
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