Barclaycard customers whose credit limits have been cut by as much as 95 percent have faced even more confusion after being falsely told that new limits were based on their average balance over the past two years.
Several customers, many of whom have had perfect payment histories, told This is Money that they were told the cuts were based on average spend, rather than the maximum balance they had accrued.
It would mean that those who only used their card for occasional large purchases like holidays to take advantage of better consumer protection would be given a limit that doesn’t cover them.
About 100,000 Barclaycard customers are facing massive cuts to their credit limits
For example, someone who spends £ 2,000 a year on a family vacation and has not made any other purchases on the card could have a credit limit of as little as £ 166 if their average balance was used to calculate it.
Meanwhile, consumer spending has largely fallen over the past 13 months due to the pandemic and multiple lockdowns, with billions of pounds off credit card balances.
Following Barclaycard’s proposed cuts, some customers are facing spending limits as low as a few hundred pounds, which will be cut by as much as 99 percent in some cases.
This is Money has received more than 450 emails since last Monday about the impending cuts, with many of long-standing clients angered by the proposals and sawing their Barclaycards to pieces in protest.
The credit card company flatly denied on multiple occasions that average balances would be used to calculate new credit limits.
However, multiple customers have told This is Money that this is the explanation they received from customer service.
Louise Porter, 42, of Hampshire, whose limit will be lowered from £ 11,900 to £ 1,650, received a letter last week on April 19.
Louise Porter was told the cuts had been cut to her average balance over the past two years. Barclaycard, however, denied cutting back on this basis
It said, “Your future credit limit will be £ 1,650, the reason we chose this amount is that when we checked your average balance over the past two years, it has been slightly below this amount.”
Louise previously told This is Money that she used the card for one-time large payments and then paid it off over the course of a year.
She added: ‘Their criteria for using an average balance is silly, they should definitely look at the highest balance. I don’t understand their logic or lack of it. ‘
Some reported similar experiences. Mark Uffindell, another who wrote to This is Money, said: ‘I was recently informed by Barclaycard that they are lowering my spending limit from £ 8,000 to £ 400.
‘The reason I gave when I contacted them was that £ 400 was my average spend with them.
Your future credit limit will be £ 1,650. The reason we chose this amount is that when we checked your average balance for the past two years, it was slightly lower than this amount.
Barclaycard letter to Louise Porter, April 19
‘My average account is between $ 1,200 and $ 3,000 per month. The proposed facility wouldn’t pay my monthly fuel bill. ‘
He added, “As with many clients, I have a direct debit to pay the required minimum payment each month, although the full amount is generally paid monthly before this facility takes effect.
‘Again I suspect, like many other customers, I am looking for a different card. I feel dumped and am afraid I will now have to spend time looking for alternative arrangements. ‘
For a third customer, Daniel James, his spending limit will be lowered from £ 12,500 to £ 2,200, which he described as a ‘slap in the face’ and was initially below his current balance.
He said, “I complained about this and was then told they calculated the average of how much a customer uses on their card.”
The move means more confusion for an estimated 100,000 customers already struggling to understand Barclaycard’s rationale for the proposed cuts, holding it to affordability concerns amid the coronavirus pandemic.
We reported last week the company, which, along with Barclays’ debit cards, accounts for nearly £ 1 out of every £ 3 spent in the UK, seemed to have taken a one-size-fits-all approach to borrowers.
Some, including Louise, were told to provide details of their income, which in many cases has remained the same or even improved in recent years, in order to keep their old credit line, but they were also told that the company had increased their financial resources had never been checked. situation. The company has denied this.
What can you do if it bothers you?
Those affected by the Barclaycard credit card foreclosure fall into two categories. Some have been told they can appeal the decision if they provide the bank with up-to-date information about their income, and others cannot.
For the former, things are pretty straightforward if they want to try and keep their Barclaycard limit. They can write to the bank and argue why the decision should be reversed and their old limit returned to them.
However, there is no guarantee that this would be successful.
For the latter, they can accept the decision and keep a card with a lower credit limit, or go elsewhere.
Some Barclaycard customers said they could appeal the decision by submitting proof of income
If they want to go elsewhere, they should settle the balance on their Barclaycard first or transfer it to an interest-free transfer agreement with a term of no less than 29 months. However, there are costs associated with transferring a balance.
The best deal available in our guide, from Virgin Money, charges 3 percent on the amount being transferred.
If someone wants to apply for a new card, it is first of all worth checking their eligibility.
Those like ClearScore and Experian offer this, allowing applicants to see how likely they are to be accepted for a card without filing a formal application that will be displayed on a credit file.
Experian also offers a service for some card providers that allows applicants to see if they are getting a high enough credit limit to cover their balance transfer, which, given what happened with Barclaycard, may be worth checking out.
Sara Williams, a debt counselor who runs the Debt Camel blog, added: “The limits of so many clients have been broken that Barclaycard doesn’t seem to be targeting those in financial difficulty specifically.
But some affected people will have a hard time. If this is you, now is a great opportunity to talk to a debt advisor like StepChange about your options – getting the interest on credit card debt frozen can take a lot of the pressure off. ‘
She added, ‘If your limit had been stupidly high before and this has caused you a lot of trouble over the years, you may have good reasons to file an affordability complaint and ask for a refund of the interest you paid . ‘
As a result, This is Money has called on the company to reconsider its cuts for those whose finances have remained stable.
However, those whose new limit exceeds their maximum balance for the past two years cannot appeal the decision.
It told This is Money after investigating Louise Porter’s case that she was being misinterpreted “ because of human error. ” Instead, it said her new limit was “ based on a personal affordability assessment ” and apologized.
A spokesperson said: “I can confirm that Barclaycard does not use average customer balances to calculate limit reductions.
“For some customers, their new limit is higher than their peak balance for the past two years, which means they should be able to continue using the card in the same way as before.”
They added: ‘We have a duty of care to our customers to ensure that their credit limits are affordable so that they can manage their loans effectively.
“To assess affordability, we look at our clients’ finances across their entire loan portfolio to make sure we are borrowing responsibly and that they are not borrowing more than they can easily afford.
‘If customers think they can afford a higher limit than communicated, we ask if they contact us so we can reassess our review. We are extending the time that customers have to provide this additional information until the end of May and will not lower any limits for that.
“Customers can reach us by contacting us using the details in our correspondence with them.”