Barclaycard customers are calling on the company to reverse the aggressive limit cuts on credit cards that have hit cardholders whose financial conditions have remained stable – or even improved – over the past year.
This Money received an overwhelming number of responses from our readers via email and on social media after we reported on the growing backlash against the credit card provider yesterday.
Credit limits have been slashed by more than 90 percent in the guise of “responsible lending” but it increasingly appears the company has implemented a one-size-fits-all approach to borrowers.
As more cases of seemingly inconsequential reductions in credit limits come to light for customers whose finances remain flat and never checked, This is Money is calling on Barclaycard to reconsider.
Hundreds of Barclaycard customers have contacted This is Money to say their credit limits have been cut
Among the more than 400 responses we received since Monday morning were many customers who said their purchasing power had diminished even though they had never had problems before or experienced a loss of income.
And while the lender said that in certain circumstances it could appeal the decision by providing details of its income, clients told us that this information had not been requested before.
Barclaycard told others it was lowering its limits due to the impact of the coronavirus pandemic on people’s finances, but then asked the credit card company to admit it had never checked their financial situation.
‘They have never checked my financial situation in 23 years’
Here’s the money, Mark Gove, 65, told: ‘I got a letter from Barclaycard last week advising me the £14,600 cap in May would be reduced to £1,850, barely enough to book a decent holiday.
I’ve had the card for 23 years and in all that time they’ve never checked my financial status. I retired in 2017 after working at a bank, and ironically, my wife and I are now more comfortable financially than we have been in years.
Personal finance blogger Lee Silsby said his credit limit had been reduced from £16,100 to £500, a reduction of 97%.
He added, ‘I plan to respond to the letter with the information they asked for which will take me some time and cost in printer ink. I shall be intent on pursuing them to the Ombudsman even, and unless I shall be reimbursed to the maximum and compensated for my time and efforts in dealing with them.
Another customer, Claire Davenport, said: ‘I recently lowered my Barclaycard limit from £9,100 to £6,900 despite the fact that I’m about to go back to work the same number of hours I used to do.
“I’ve also managed partial time off prior to this and have never missed a Barclaycard payment or had to take paid holidays.”
This is the money and our brother Money Mail has been reporting since last Wednesday on the fact that many borrowers whose credit limits have been lowered by huge amounts have never missed payments or struggled to make them, despite the coronavirus pandemic.
Emma Hassler, from Cambridgeshire, has been told her credit limit has been reduced from £5,700 to £250, a drop of more than 95 per cent.
“I’ve been with them for eight years with no problems and no missed payments,” she said. I have never maxed out the card and have always used it responsibly. I spent about £1000 at most and by the time they reduced the limit I had £100 left on the card. It was a card for emergencies, £250 wouldn’t cover much.
“I don’t know what they’re playing at.”
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.”
The bank blamed the economic impact of the coronavirus for its decision to lower credit limits for more customers over the past 12 months.
However, the average Equifax credit score in the UK rose 11 percent to 398 out of 700 between March 2020 and March 2021, according to credit checking service ClearScore.
This is largely because things like mortgage and credit card holidays haven’t affected a customer’s credit files.
However, cutting credit limits can be beneficial, as a higher card limit utilization may indicate dependence on debt and the need to push it to the limit.
Their message said it was due to other debts and the way I used the card. During the pandemic I have reduced my other debts and the way I use the card hasn’t changed in years. I’m so disgusted
Tim Brunsden, Barclaycard customer
Tim Brunsden, a Barclaycard customer for 35 years, said: ‘I’ve lowered the limits on two credit cards, one from £12,500 to £3,500 and the other from £8,000 to £3,000.
Their message said it was due to other debts and the way I used the card. During the pandemic I have reduced my other debts and the way I use the card hasn’t changed in years.
“I am so disgusted.”
Emma Hassler and several others decided to pay off their debts and cut their cards in protest of the changes. Others, however, choose to fight their corner and regain their old buying power, by providing Barclaycard with details they insist you never asked for.
Some who are also customers of Barclays, the parent bank, have questioned why they needed to provide this information to the company in the first place and why it was not kept on file.
Barclaycard said: “We use our own data, and data held by credit reference agencies, to review the individual financial circumstances of each customer when we make a lending decision.
If clients feel they can afford a higher limit than the declared amount, we have provided information on how to appeal the decision by checking their income.
“We have extended the time period for providing us with the relevant documents from 30 days, to the end of May – no limits will be reduced before then.”
“My limit is reduced below my current balance”
Affected customers also responded with another piece of Barclaycard’s defense of its actions.
That’s Money, he said: “When we reduce a customer’s line of credit, we will not reduce them below their current balance, and we will ensure that they have at least enough room in their account to continue basic spending.”
It added that some customers would not be able to contest the reduction because their new limit was higher than their maximum balance in the last 24 months, which covers a period in which spending declined as a result of the pandemic.
However, many affected people said their limits had been lowered below their current balance. Although in January Barclaycard waived a fee of £12 that would penalize those who overstepped their bounds, this left them angry and frustrated.
A customer from London said: “My balance was around £900 and they were reducing my limit to £250.
“The counselor told me I would be contacted to encourage me to pay it off.”
Amy Forrester, another person whose income has increased in recent years, said: ‘I got a letter saying my credit limit was going to drop from £4,000 to £450. What’s even more annoying is that I have a balance of £513.
In order to maintain a good credit score, I would like to use less than 50 percent of my credit limit, and now it seems they are just looking to take that out of people and/or cause their customers financial hardship.
I’ve tried talking to them on the phone about it but honestly I just felt like I was being scammed and given excuses. I have yet to submit my payslips for this to be re-evaluated, given I earn more now than I did when they agreed a cap of £4,000.
Barclaycard again denied any such cuts.
She added, “When we reduce a customer’s credit limit, we will not reduce it below its current balance, and we will ensure that it has at least enough space in its account to continue basic spending.
It is important to note that credit line reductions do not happen immediately.
Therefore, some customers may have recently spent money on their account – after we have calculated their maximum account balance – which means that their current balance is higher than the reported credit limit.
“We want to reassure these customers that their limit will not be reduced below their balance – there are checks in place before the limit reduction goes into effect, which prevents this from happening automatically.”
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