Credit card shock

[LemonLass]

Hi all
Just shocked to received a text from my credit cars co advising that my credit limit is £1,250 with immediate effect. Shocked and wanted to warn others who use their card, especially if you are unable to pay whole outstanding amount off each month.

My credit limit was £9,000. I have had the card 8 years. They put the credit limit up each year but I have refused the last few of their proposed increases as I dont go near the top end and no big purchases planned (where you would have some protection from a purchase on credit card eg faulty goods).

My credit score is good (700+) with agencies whatever that means 😄 I have not missed payments on any bills or "mis-used" the card.

Luckily my current balance is under that amount and I will get it paid in full ASAP but what if I couldn't? Had given me a bit of a shake!

Has anyone else experienced this?
X

How often do you use the card?
I received a letter greatly reducing my credit card limit. I hadn't used the card in years (kept it as a "just in case" card. They said if I contacted them or used the card they would restore the limit.
I haven't bothered.

That makes sense but in my case, I may put one or two small transactions on it every month.

The shock is that when the credit card co have increased credit limit in the past, they wrote and gave notice to refuse it. I have literally just received this dramatic drop in available credit in a text message. I kjow rhat this will hit my credit "worthiness" because I would have less "available" credit, meaning even a few transactions each month could be exceeding what the card co deems acceptable. I think 30% utilisation is the sweet spot. Maybe I am wrong.

I am going to get the balance paid off and not use it so perhaps itnis a good thing. I am paying it off but had planned to do over 3 months. Now it will be paid pronto in case they pull the rug again 😮

This happened to me once and then a week later they contacted me to say it was a mistake and they put it back to the original amount.

That sounds really odd. If it were me, I'd be in contact with them to see what the hell was going on.

I know Barclaycard had a phase of doing this a few years ago, maybe it's the card brand and they have done it to a few people

Next Directory are known for doing this also

I kjow rhat this will hit my credit "worthiness" because I would have less "available" credit, meaning even a few transactions each month could be exceeding what the card co deems acceptable. I think 30% utilisation is the sweet spot. Maybe I am wrong

I think stuff like that is just a minor part of the overall picture, so I wouldn't worry about it. Your credit limit reduction could be due to some end of financial year tidying up of their balance sheet as it's potential debt they no longer have to account for.

Plus credit cards aren't designed for long term borrowing due to the high interest rates so anything that discourages people from building up a balance they can't pay off every month is a good thing.

If people want to spend more than their credit limit allows, a loan or savings would be a likely better option, with part payment on a credit card for the financial protection.

I guess there was something in your usage or scoring that made their algorithm think you were no longer a great bet for credit. 700 isn't a great credit score, it's 'good' which is kind of in the 'amber' range.

That very much depends which agency you use.

Agreed. The agency I went to, to check my credit score to check any changes reckons "I am in good shape" financially.

This credit limit reduction has definitely led me to be less complacent about "available" credit so it isn't a bad thing. Just shocked they can just text and say effective immediately. Their money, their rules 🙄

Quite often they will give it back in a couple of months. They wouldn’t take it below your current balance and is often nothing to do with your account. The company as a whole maybe too exposed or had a run of bad debt etc.

Hmmm. My sainsbury’s credit card did similar to me last year. I hadn’t used the card in about 4 years so was thinking maybe that was why - as in, they no longer have ‘evidence’ that I’d be able to manage repayments because I hadn’t been using it. Could this be similar to your situation? You’re only make small purchases on the card. If you ring them they’ll probably increase the limit again. I don’t think they’re likely to be pulling the rug from beneath you. They wouldn’t reduce the allowable amount under what you already owe

I don't have credit cards any more. The last time they pulled this stunt I was halfway through some major building work and couldn't pay the builder. I had to borrow off relatives. It was a rightmare.

Credit card companies can’t make enough money if many of the facilities they’ve extended to people aren’t being using. There’s a limit to the amount of credit they can extend (based on their balance sheets). They’ll make more money out of people use more of their limit; if you don’t use it they’ll allocate it to new customers who hopefully will. And it’s not just about those that pay don’t off their accounts in full every month, as they take a % of the amount spent using the card. A high limit that’s not used generates no merchant fees and no interest either. They increase limits in the hope you’ll spend more. If you don’t, they’ll try elsewhere!

Sounds like a nightmare for budgeting in that scenario

No @Chewbecca, that's not correct for TransUnion / Credit Karma whose maximum score is 710.

Yes a few years ago. I paid off CC's as was going maternity and wanted to reduce monthly outgoings

I had quite a decent credit limit (£15,000) but never used and was keeping it for emergencies. They reduced it to £1,500 ISH

They gave me some waffle but I assume when you pay off you have transferred the balance

Makes sense though am unimpressed by a text telling me this kicks in as same time as notification. In the past, I have used their 0% balance transfer offer. As new limit just over £1,000, the card isnt that useful. Hey ho, it may be time for me to say "so long" to the card...

MBNA did this to me in 2008 totally out of the blue. I had a credit limit of £13k and a balance of about £2500. They wrote to me reducing credit limit to £2500. I was in a position to pay the balance off immediately and close my account with them because I had another card that did not do this. Since the credit crunch was over MBNA regularly write to me offering me another credit card but I'll never use them again. I've also heard similar from friends in 2008 as well. This type of thing is the forerunner to a recession where companies get rid of a little of staff and unemployment rises. RR putting extra burden on businesses is causing this financial climate where a recession is looming because she's shutting down growth with her actions at the same time whilst claiming to want growth.

This happened to me last year with a card I only used abroad (no fees!) and it turned out it was because another company had incorrectly said I had missed payments. It might be worth checking with a few credit reference agencies to see if that’s the case. I cancelled the card in the end as I didn't really need it so I didn’t want to go through the credit application to increase it again.

Yes, checked a credit ref agency file straight away in case something misreported when the credit agency shows that average rating in my area is 550 but mine was over 700 and "good"

Interesting (and good to know). I haven't experienced this with any accounts or cards so taken aback. I have had the card 8 yrs and, if anything, I have to refuse their unsolicited limit increases. Shocked they can say this starts now rather than a letter when they increase and giving time to choose. No choice here. Has pushed me to pay off the small balance at least.

It's most likely because you haven't been utilising your credit limit if you have only been using it for a few small transactions each month. I've had my limit reduced for this reason in the past.
I now put all large purchases inc flights and hotels on my credit card for the extra protection, always pay it off at the end of the month.

That’s just showing your score with one agency so might not have all information about your credit. I’d recommend checking with at least two credit reference agencies as not all lenders use the same ones. Then I’d advise checking for missed payments, credit searches and what accounts they have on file for you as just your score won’t give you that information.

Thanks I will check other files as never missed a payment as I put bills on DD with funds available to cover.

It was handy being able to put holidays on the card for added protection (would only ever book ABTA as well). Just cant fathom why no notice "with immediate effect" sounds harsh. They have peeved me 😆