A number of banks have responded to the ‘credit crunch’ by lowering credit card limits and even declining credit in some cases.
Many lenders are hoping to reduce costs they incur when customers find themselves in financial difficulty and have problems repaying debts.
Approximately half of Barclaycard applications are being refused, while 500,000 of its customers have had their credit limits slashed. Cardholders are now being carefully monitored for any signs of financial struggle.
HSBC is also cutting down on lending levels as the result of new solvency laws which stipulate that banks must have an extra capital cushion for unused credit in card or overdraft facilities.
The Consumer Credit Counselling Service has reportedly received 18-20 per cent more calls to its helpline between January and June than in the corresponding period last year. Customers are struggling to obtain credit in light of recent events, including the Northern Rock debacle.
The problem may worsen as banks potentially face much greater compensation payments to consumers.
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