In order to curb the amount of credit they are dishing out while the credit crunch rages on, credit card companies have reduced their customers' spending limits by £3.1 billion.
Research from MoneyExpert.com has found that approximately 1.8 million UK credit card
customers – about one in 20 – have had their credit limits reduced in the last six months.
It also revealed that while almost half of credit card customers have had their limit cut by less than £1,000, with many under the £500 mark, the 15 per cent which have experienced credit reductions of more than £2,500 makes the average cut £1,680 per customer.
MoneyExpert.com is concerned that this is further evidence that credit card companies are acting on fears that their customers are struggling with their credit cards and other debts and will not be able to repay them as the credit crisis takes its toll. Furthermore, the price comparison website believes that the worst is yet to come.
"Overstretched consumers might look to resort to credit in a bid to make ends meet but they should not rely on it as a way of keeping spending." Sean Gardner of MoneyExpert.com said, but "Credit card companies are becoming stricter in who they lend to and the amount of money their customers can borrow.
"The credit card market is very competitive as people turn to interest free deals to tide them over some tough economic conditions. And there’s nothing inherently wrong with taking advantage of a zero per cent credit card for a year as long as spending is controlled.
"The warning lights should be shining brightly, however, if you find you’re going from card to card without making a dent in the amount you owe. If you don’t have a repayment plan in place it is time to get one."
Around 980,000 people switch credit card providers each month, according to MoneyExpert.com's Switching Index, generating doubt over whether such a high number opting for a balance transfer credit card
indicates that switchers are managing their money effectively, or that they are merely "papering over some serious financial cracks." said Mr Gardner.
He continued to say that "it is almost always the case that you will save money by switching to a new credit card. It needn’t affect your credit rating to switch and credit cards can at least help people to stave off hard times." The best credit card deals
"offer you interest free credit for as much as 15 months."
However, he also warned consumers against switching without ensuring that it makes the most financial sense for their personal circumstances.
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