Debt -
Credit Card Companies Move To Control Debts - 07/04/2008
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As personal debts pile up hitting £1.3 trillion, credit card companies have cut lending to Britons by up to £3.1 billion, reports said.
The latest move to restrict the spending power of consumers is not unconnected with the current financial crisis, failure of borrowers to keep up repayments and recent decision by Egg to cancel the cards of 161,000 of its customers.
A study by comparison site MoneyExpert.com said the credit limit of about 1.8 million credit card customers was slashed in the last six months. It added that there was an average of £1,600 reduction.
Most of those affected had been considered high risk customers, especially young borrowers. About six per cent of 25 to 34-year-olds, according to the survey, said their provider has cut their spending allowance.
Typically, the poll revealed, customers whose credit limits were reduced saw a cut of up to £500 or less. And that nearly half or 47 per cent of the cuts were no more than £1,000, while 15 per cent had their credit card limits cut by more than £2,500.
MoneyExpert.com also found that nearly 1 million people switch credit card providers each month, which indicates that many of them use credit cards to manage their finances in spite of increasing lending restrictions.
Chief executive of MoneyExpert.com, Sean Gardner warned of tougher times ahead. He also advised overstretched consumers not to rely on credit cards as a way of keeping spending, adding that credit card companies are now stricter in selecting the amount and kind of people the lend to.
“The warning light should be shining brightly if you find you’re going from card to card without making dent in the amount you owe,” he said.
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