An increased limit may sound like a gift, but for some borrowers it is the chance to get deeper into debt they cannot afford
(PRWEB) March 23, 2010
Two-thirds of credit card borrowers have had their credit limit increased without their credit card company asking them, according to a new survey from consumer finance website Creditchoices.co.uk.
The survey was conducted just a week before the government and credit card providers agreed on five new rights for customers, including the right to reject credit limit increases.
Chris Eagle, marketing director at Creditchoices.co.uk, said: “An increased limit may sound like a gift, but for some borrowers it is the chance to get deeper into debt they cannot afford. If you miss monthly repayments your credit rating will suffer, making it harder to find a new credit card deal.”
“Our poll found 63% of credit card customers have had limits increased without being asked and over one in 10 people owe more than £3,000.”
Credit card companies have faced stiff criticism for increasing limits for borrowers who are already struggling with debts, encouraging them to spend more than they can afford.
The new credit card rules will allow customers to reject future credit limit increases, and reduce their limits on request. Credit card companies will also be banned from increasing limits for those in financial difficulties.
There are now 60.4 million credit cards in the UK, two-thirds of which have an outstanding balance, according to figures from the British Bankers’ Association (BBA). The UK’s credit card bill currently stands at £63 billion.
“Credit cards are a flexible way of borrowing, but an expensive way,” added Creditchoices.co.uk’s Eagle.
“If you pay off your balance each month, or use a card to spread the cost of a major purchase over a couple of months, then you are using your card wisely.
“If you are not clearing your balance, think about switching to a 0% balance transfer deal and clearing the debt before interest bites, or shop around for a card with the best rate.”