Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to Anonymous,johnhemming,Anonymous,Rhyd6,dredd0, for Donating to support the site

Credit Card Limits Being Reduced? (e.g. Barclaycard)

Credit Cards, borrowing on Loans and discussions on Stoozing
neversay
Lemon Slice
Posts: 463
Joined: January 27th, 2017, 9:31 pm
Has thanked: 617 times
Been thanked: 196 times

Credit Card Limits Being Reduced? (e.g. Barclaycard)

#321373

Postby neversay » June 25th, 2020, 1:23 pm

I just received a letter from Barclaycard saying that as I hadn't used my Barclaycard Rewards card for a while they reducing the credit limit on my card from £9,670 to £1000 to "protect you from fraud" then closing it automatically in August. I'm closing it today as it was unused and I'm happy to say goodbye to Barclaycard.

The fraud excuse seems lame. Are banks are doing this across the board to reduce their risk exposure and support capital ratios?

Lootman
Lemon Half
Posts: 7376
Joined: November 4th, 2016, 3:58 pm
Has thanked: 53 times
Been thanked: 1235 times

Re: Credit Card Limits Being Reduced? (e.g. Barclaycard)

#321379

Postby Lootman » June 25th, 2020, 1:30 pm

neversay wrote:I just received a letter from Barclaycard saying that as I hadn't used my Barclaycard Rewards card for a while they reducing the credit limit on my card from £9,670 to £1000 to "protect you from fraud" then closing it automatically in August. I'm closing it today as it was unused and I'm happy to say goodbye to Barclaycard.

The fraud excuse seems lame. Are banks are doing this across the board to reduce their risk exposure and support capital ratios?

Banks can and do this for a variety of reasons. The fraud reason deoesn't make a lot of sense to me. If you hardly use the card and then there is suddenly a large amount of activity then it would be easy for the issuer to see that and contact you to ask if the charges were genuine or not. That has happened with me a couple of times: Once the charges were genuine and once they were not.

There are other reasons why an issuer might do this. One is to reduce the bank's exposure in general, which would tend to happen at times like this, or back in the 2008 financial crisis. The other is simply that (for them) you are a bad customer because you aren't making any money for them but are imposing costs.

NatWest told me they were reducing my credit limit a couple of years ago. I rang them to complain and they reinstated it.

Finally I find it quite useful to have one card with a very low limit, say £1000. It prevent entities trying to charge more than that on your card. I use it for hiring cars as car rental companies have a nasty habit of trying to charge your card for damage, parking tickets and other sundry items.

Alaric
Lemon Quarter
Posts: 4323
Joined: November 5th, 2016, 9:05 am
Has thanked: 13 times
Been thanked: 871 times

Re: Credit Card Limits Being Reduced? (e.g. Barclaycard)

#321381

Postby Alaric » June 25th, 2020, 1:33 pm

neversay wrote: Are banks are doing this across the board to reduce their risk exposure and support capital ratios?


NatWest did this a while back.

viewtopic.php?t=8159

Dod101
Lemon Half
Posts: 5796
Joined: October 10th, 2017, 11:33 am
Has thanked: 1313 times
Been thanked: 2323 times

Re: Credit Card Limits Being Reduced? (e.g. Barclaycard)

#321385

Postby Dod101 » June 25th, 2020, 1:40 pm

I think all banks tend to do this from time to time. I had my limit cut on my credit card (which I do not use very much anyway) to £5,000 from £10,000. I occasionally need to remember but it has been no hardship to me. I suppose it means that the banks are reducing their risk exposure as my reduction happened at the time of the 2008/9 crisis.

If I need more than that I can call them and get them to increase it.

Dod

dealtn
Lemon Quarter
Posts: 1387
Joined: November 21st, 2016, 4:26 pm
Has thanked: 32 times
Been thanked: 474 times

Re: Credit Card Limits Being Reduced? (e.g. Barclaycard)

#321393

Postby dealtn » June 25th, 2020, 2:00 pm

Banks have a regulatory cost of capital.

That cost of capital is measured by a model approved by the regulator.

One of the variables in that model is the potential for exposure to tail events economically speaking. You don't need to understand the model to comprehend that in more "volatile times" the risk goes up. The risk going up increases the cost of capital.

This cost of capital isn't just applied to the banks assets, but also its contingent ones. An unutilised credit agreement, of which an unutilised credit card limit is one, has a (smaller) cost of capital attached to it, and this cost will have gone up too.

To mitigate these increased costs Banks can "reprice" their products, which is in itself costly, and needs explaining to customers (and exposes them to the risk of "consumer groups" pointing out this "unjustifiable" increase in price (interest rate for instance, or fee). Alternatively Banks can look to reduce their contingent exposures, and selectively reduce credit limits, particularly ones rarely used. Most customers simply accept this, some complain/question and full or partial reinstatement occurs (line of least resistance).

Ordinary customers won't understand/believe the "cost of capital on contingent exposures" explanation. Banks get that.

It is also the case that cards with unused (and large) credit limits expose the owner (and also the Bank) to fraud risk.

Ordinary customers (better) understand the "fraud exposure" argument.

The "fraud exposure" argument is used in the communication between Banks and their customers in their letter explaining the reduction in limit.

neversay
Lemon Slice
Posts: 463
Joined: January 27th, 2017, 9:31 pm
Has thanked: 617 times
Been thanked: 196 times

Re: Credit Card Limits Being Reduced? (e.g. Barclaycard)

#321428

Postby neversay » June 25th, 2020, 3:18 pm

Alaric wrote:
neversay wrote: Are banks are doing this across the board to reduce their risk exposure and support capital ratios?


NatWest did this a while back.

viewtopic.php?t=8159


Thanks . I notice in that thread that @bungeejumper said Barclaycard had done the same to him - notably on 27th Feb.

Dod101 wrote:I think all banks tend to do this from time to time. I had my limit cut on my credit card (which I do not use very much anyway) to £5,000 from £10,000. I occasionally need to remember but it has been no hardship to me. I suppose it means that the banks are reducing their risk exposure as my reduction happened at the time of the 2008/9 crisis.
Dod


Thanks too @Dod101 and @dealtn. I get the capital ratios issue during these volatile times. I was just wondering whether banks are panicking and furiously reducing credit limits right now to improve their ratios? (noting Mervyn King and the IMF opinions published today).

Just looking at my credit record, I have accumulated 7 cards (including stoozing) and have an available card credit of £55,057. I've got a perfect credit score, always pay balances off monthly, and only using cards for rewards and fraud protection. So even without the Barclaycard, it's a stupid amount of available credit so it would make sense to reduce it (besides, we are barely spending at the minute). The current cards are:

Amex Platinum £5000 - 0.5% cashback
Amex Rewards £15,000 - amex rewards for air miles
Capital One £7500 - previously for rewards, now rarely used as no benefits
Halifax Clarity £9000 - was for overseas 0%
Tesco £3000 - tesco fuel/shopping points, rarely used
HSBC £6000 - with my current account

I'm minded to ditch the Capital One card and Tesco. However, I may extend the mortgage slightly at the beginning of next year to fund a house extension, so must maintain the perfect credit score.

Is there a reliable way to tell whether the credit agencies will see the reduction in cards/limits as a positive or negative?

1nvest
Lemon Slice
Posts: 288
Joined: May 31st, 2019, 7:55 pm
Has thanked: 21 times
Been thanked: 84 times

Re: Credit Card Limits Being Reduced? (e.g. Barclaycard)

#322188

Postby 1nvest » June 28th, 2020, 1:25 am

I reduced my Barclaycard limit down to £400 (was very easy to do) as I use it for online stuff where it is potentially at greater risk of being involved in a fraud and I just feel more comfortable having a relatively low risk. Casual purchases/payments, almost like a pre-paid card but with a pay later position. For other purposes I use another card with a modest/high limit that I use relatively infrequently. With the £400 limit card that just means making payments more often (I regularly pay off all cards in full before the pay-by date) to reset it back to £0 in debt. So if I do get through £400 one day/night-out, I'll be paying it off the next.

I have had a situation where after using it in a London petrol station to buy some snacks (meal deal), a couple of days later without having used the card elsewhere Barclays were phoning me up with a query against the purchase of £200 trainers and then declined further attempted purchases in other stores ... in a foreign country. After saying where I had last used it (in the petrol station) and that I hadn't been abroad recently they immediately struck that £200 debt from my account. I could envisage that if it had been more local purchases then they might have been more suspicious of me fraudulently abusing the card and maybe resulting in dispute and that's where the low limit would be a backstop to the amount I might be held liable for. I suspect that they have to deal with individuals that might buy stuff and then later claim that it wasn't them that had used the card.

No idea as to what effect lowering your credit limit might have on any credit scoring. Wouldn't have thought that it would be a negative, especially if you also have other card(s) with high limits.

Mike4
Lemon Slice
Posts: 632
Joined: November 24th, 2016, 3:29 am
Has thanked: 101 times
Been thanked: 221 times

Re: Credit Card Limits Being Reduced? (e.g. Barclaycard)

#322217

Postby Mike4 » June 28th, 2020, 9:55 am

1nvest wrote:I reduced my Barclaycard limit down to £400 (was very easy to do) as I use it for online stuff where it is potentially at greater risk of being involved in a fraud and I just feel more comfortable having a relatively low risk. Casual purchases/payments, almost like a pre-paid card but with a pay later position. For other purposes I use another card with a modest/high limit that I use relatively infrequently. With the £400 limit card that just means making payments more often (I regularly pay off all cards in full before the pay-by date) to reset it back to £0 in debt. So if I do get through £400 one day/night-out, I'll be paying it off the next.

I have had a situation where after using it in a London petrol station to buy some snacks (meal deal), a couple of days later without having used the card elsewhere Barclays were phoning me up with a query against the purchase of £200 trainers and then declined further attempted purchases in other stores ... in a foreign country. After saying where I had last used it (in the petrol station) and that I hadn't been abroad recently they immediately struck that £200 debt from my account. I could envisage that if it had been more local purchases then they might have been more suspicious of me fraudulently abusing the card and maybe resulting in dispute and that's where the low limit would be a backstop to the amount I might be held liable for. I suspect that they have to deal with individuals that might buy stuff and then later claim that it wasn't them that had used the card.

No idea as to what effect lowering your credit limit might have on any credit scoring. Wouldn't have thought that it would be a negative, especially if you also have other card(s) with high limits.


May I ask a related question hopefully not too far off topic? Is this bit I highlighted really how credit card limits work?

Is the credit limit on a credit card really a 'hard' limit that functions as you describe, or are they like bank current accounts these days where they pay out anyway if you breach your limit with a transaction? Do they not instead of blocking the transaction, take the opportunity to apply charges for exceeding your limit? Or has all that been stopped now? Always struck me as pretty unfair.

Thanks.

Alaric
Lemon Quarter
Posts: 4323
Joined: November 5th, 2016, 9:05 am
Has thanked: 13 times
Been thanked: 871 times

Re: Credit Card Limits Being Reduced? (e.g. Barclaycard)

#322231

Postby Alaric » June 28th, 2020, 11:15 am

1nvest wrote:I have had a situation where after using it in a London petrol station to buy some snacks (meal deal), a couple of days later without having used the card elsewhere Barclays were phoning me up with a query against the purchase of £200 trainers and then declined further attempted purchases in other stores ... in a foreign country.


I could suspect that for a frequently used card, there's a regular pattern to the expenditure which their computers can monitor. Thus anomalies stick out regardless of the credit limit.

1nvest
Lemon Slice
Posts: 288
Joined: May 31st, 2019, 7:55 pm
Has thanked: 21 times
Been thanked: 84 times

Re: Credit Card Limits Being Reduced? (e.g. Barclaycard)

#322277

Postby 1nvest » June 28th, 2020, 1:31 pm

Mike4 wrote:Is the credit limit on a credit card really a 'hard' limit that functions as you describe, or are they like bank current accounts these days where they pay out anyway if you breach your limit with a transaction? Do they not instead of blocking the transaction, take the opportunity to apply charges for exceeding your limit? Or has all that been stopped now? Always struck me as pretty unfair.

Thanks Mike. In practice I never get to the limit, old-school of treating it like cash in my wallet, but in electronic form and mental awareness of how close I may be to the limit (most often I don't get anywhere near the £400 limit on the type of spending I use it for). Looking at the Terms and Conditions it looks like you're right, and they apply a credit over-run fee if you exceed the limit. I'm terrible with the relatively frequent 'changes of terms and conditions' letters often received and admit that I don't read them, just bin them (slaps own wrist). I'll have to look to migrate over to a pre-paid card instead now. Know little about those as I've had a Barclaycard for decades and had wrongly assumed I was running with something similar to a pre-paid.

Going back to that fraud report when they phoned and asked had I spent £200 on trainers (sportswear shop), I never got to see the transactions and reversals as they struck that/those debts off there and then, but I believe they said additional spending had been stopped (presumably the fake card/whatever being used in other stores/elsewhere), at least that's what I thought they said - could be wrong. Perhaps those other fraud spending events did actually go through as well, I just don't know for sure. Perhaps being foreign based transactions and in finding out I hadn't been abroad they might have ticked off a number of actual foreign transactions.

Thanks again. If as seems to now be the case that credit limits are just penalty trigger levels then I have no regard/need for that at all.

gryffron
Lemon Quarter
Posts: 2018
Joined: November 4th, 2016, 10:00 am
Has thanked: 110 times
Been thanked: 395 times

Re: Credit Card Limits Being Reduced? (e.g. Barclaycard)

#323125

Postby gryffron » July 1st, 2020, 11:34 pm

1nvest wrote:If as seems to now be the case that credit limits are just penalty trigger levels then I have no regard/need for that at all.


I don't believe that is generally true. After all, debit and prepaid cards have hard set spending limits, so CC must surely be the same? I would certainly expect any electronic transaction to fail rather than take you over the limit. And that is nearly all transactions in the UK these days.

You can still do manual swipe of course. But if queried, the vendor is automatically liable, rather than the cardholder. So CC companies are perfectly happy to refund any dodgy manual transactions.

Gryff


Return to “Credit Cards and Loans”

Who is online

Users browsing this forum: No registered users and 2 guests