In April 2021, Barclaycard is cutting a lot of customers’ credit limits. Some of the reductions are dramatic.
Here is what one Debt Camel reader said:
Today I received a letter from Barclaycard informing me my credit limit is being reduced from £5,000 to £250 in 1 months time.
My balance is zero and has been for several months. Not very happy about this as it’s there for emergencies etc and it’s quite odd and out of the blue.
This newspaper article gives more examples:
- one man who has had a Barclaycard for 24 years had his limit cut from £9,000 to £2,050;
- a woman has had her limit cut from £11,900 to £1,650.
This is the second time Barclaycard has cut credit limits since the pandemic started. In summer 2020, Barclaycard annoyed many customers by cutting their credit limits when they had immediate financial problems.
Cutting your credit limit can affect your credit score!
If you were planning to buy something big this year, then this is obviously a problem.
But many people don’t know that just cutting your credit limit by itself can harm your credit score, even if your balance is under the new limit.
This happens because your “credit utilisation” – the percentage of your credit limit you are using – will go up if your limit is cut.
Here are some numbers about how much your Experian credit score might change:
- with a balance under 30% of your limit, you gain 90 points;
- use over 90% of your limit and your score may drop 50 points.
The size of your credit limit also affects your score. A limit of over £5,000 adds 20 points to your score, a very low limit of under £250 takes 40 points off your score.
If you have a balance of £1500, with your old Barclaycard limit of £6,000, your balance looked low. But if your limit has now been slashed to £2000, then you are no longer “under 30% of your credit limit”. Your credit score is going to fall 90 points and you will also lose the 20 point bonus for having a high limit.
That isn’t fair! Even though your history of making the card repayments on time is exactly the same as it was before, you are being penalised as Barclaycard wants to cut its risk.
What can you do about this?
You don’t have to do anything, you can just live with the lower limit. Or, if you have other cards you can use, you can close the account.
But if you are fed up, what you can do depends on whether your Barclaycard bills over the last few years have been really affordable.
If the bills have caused you difficulty
Think about an affordability complaint. Obviously if you have missed payments or gone over the limit a lot this was a problem.
But you may have been in difficulty even if you paid every month. For example, if you were juggling a lot of payments and borrowings and your debts were getting worse.
Barclaycard may have raised your limit a lot, even though you were only making the minimum payments and though your credit record would have shown you had a lot of debt. That suggests Barclaycard didn’t make the proper affordability checks they should have done.
Read Ask for a refund from catalogues, credit cards & overdrafts – that looks at these affordability complaints and has a template letter you can use to ask for a refund of the interest and charges you have paid.
If the bills haven’t caused you any problems
Here it’s worth asking Barclaycard to look again at this. The Barclaycard letters says:
if you send us your latest income, we can review this change.
The second page of the letter explains what you need to send them. They want copies of bank statements, payslips etc posted to them and details of your childcare costs. I guess they don’t think many people will bother!
If you do this they may still decide to reduce your limit, but perhaps not to such a low amount.