Barclaycard defends decision to cut customers’ credit limits

Vicky Shaw, PA Personal Finance Correspondent
·4 min read

Barclaycard has defended cutting some customers’ credit limits after a backlash from people complaining they had been reduced by over 90%.

Some customers complained that their limits had been significantly reduced despite having never missed a payment.

It was pointed out that Barclaycard had made the reductions at a time when some people might need financial back-up.

Barclaycard said more customers had received credit limit decreases over the past year amid the impact of the coronavirus pandemic, but it added they represent a very small number of its overall customer base.

It said that as a responsible lender it must make sure people are not borrowing more than they can comfortably afford.

A Barclaycard spokeswoman said: “As with many other lenders, our credit risk models take into account changes in the UK economy, as these may impact our customers’ ability to manage their borrowing effectively.

“Over the past year, we have had to take into account the ongoing economic impact of coronavirus, and this has resulted in an increase in the number of customers receiving credit limit decreases.

“Having up-to-date credit risk models is part of our commitment to being a responsible lender, to help ensure that customers are not borrowing more than they can comfortably afford.

“For some customers, where we don’t believe that their current limit is affordable, we provide information on how to appeal the limit change by verifying their income.

“When we reduce a customer’s credit limit, we will not reduce it to below their current balance, and we will ensure that they at least have sufficient headroom on their account to continue essential spending.”

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One customer complained on Twitter: “Why, for seemingly no reason, have you slashed my credit limit by 96%?? I’ve never missed a payment and pay way more than minimum payment.”

Barclaycard invited her to log a complaint, but she said: “Lol!! As others have said what is the point?! I’ll just vote with my feet along with a whole heap of your previously loyal customers. To do this now when people might need the financial back up ‘just in case’ – shame on you @barclaycard. Shame on you.”

Another Twitter user wrote: “Having had a @Barclaycard for several years that I paid off every month without fail, they have now contacted me to say they are lowering my credit limit from £1800 to £250. Why? Its your loss as I have 3 other Credit Cards that I will now use instead!”

Another said: “#barclaycard have slashed my limit by 95pc. I’ve never missed a payment and pay over my minimum each month. Shocking treatment.”

Someone else added: “Odd way of doing business towards customers who can prove they make regular and sizeable repayments. I won’t bother appealing – I’ll just go elsewhere.”

Another customer wrote: “I’ve had the same, £10,300 to £250.”

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In May last year, Virgin Money reversed a decision to block some customers from making new purchases on their cards, saying it had listened to feedback and decided it was not the right time to make the changes.

It had previously emerged that some Virgin Money customers had received emails saying further spending on their credit cards had been blocked following a review of their accounts.

Justin Basini, chief executive and co-founder of credit score service ClearScore, said: “Average credit limits by the end of December 2020 were down by almost half (49%) of what they had been at the beginning of the year.

“As Government support packages aimed at protecting consumer finances and access to credit come to an end, we are seeing some lenders, including Barclaycard, try to manage the financial uncertainty caused by the ending of these Covid-19 support packages by reducing credit limits substantially.

“This is in line with what we saw last year, as lenders sought to minimise their risk, with the number of credit products available to consumers dramatically reduced by 77% between January (15.82) and July (3.7) 2020, during the height of the first lockdown.

“However, sudden reductions in credit limits can have a negative impact on credit scores, as higher limits show a lender’s confidence in a person’s ability to pay back money lent to them.

“Now more than ever, credit is a lifeline for many people, and lenders should be creating solutions that help consumers according to their unique circumstances.

“This would give them a chance to prove their financial stability, rather than have banks issue blanket withdrawals of credit and support that could impact their eligibility for products like credit cards, mortgages and phone contracts in the long term.”