Credit Card News Impact Of The Credit Crunch Hits 2 5m Credit Card Users 1573
Impact of the credit crunch hits 2.5m credit card users
15 May 2008 / by Daniela Gieseler
The study highlights how credit card suppliers are increasingly trying to make up for their losses by reducing card limits, introducing annual fees or closing accounts. Thus, 1.6 million customers have had their credit limits reduced and 1.3 million were told they would be charged annual fees or have had their accounts closed altogether.
However, while 25 per cent were told this was because of their poor credit rating and another 16 per cent because they were not using their account regularly, 27 per cent were not given any reason at all for the measures taken against them.
More than half (51 per cent) of those affected said they were using their cards regularly and paying off at least the minimum amount, and a further 20 per cent stated that they paid their credit card bills in full every month.
Only 16 per cent of respondents said they had missed a payment or exceeded their credit limit, which would provide credit card companies with enough reason to take action against these customers.
“We’re not against credit cards providers curbing consumers’ spending if their debts are genuinely getting out of hand,” Simeon Linstead, head of personal finance at uSwitch.com, comments. However, he urges providers to be transparent about their decisions: “Credit card companies who are taking action to close down or make changes to customers’ accounts must be completely open about how and why they have selected those customers.”
The findings fuel suspicions that credit card providers were targeting the least profitable of their customers – those who hardly ever use their cards or always pay their balance in full. These customers pay hardly any interest, which accounts for 72 per cent of credit card companies’ income, and therefore do not earn them any money.
Those who feel they have been affected unjustly by changes introduced by their provider should protest, Simeon Linstead suggests. “If your credit card provider wants to make changes to your account that you don’t like, you should challenge their decision. If you are still not happy with the outcome or don’t feel you’ve been treated fairly, take your complaint to the Financial Ombudsman Service.”
Ultimately, Mr Linstead says you can always switch to another provider: “There is always a glut of new offers available but consumers cannot view managing their finances effectively as a spectator sport. Consumers need to be willing to invest time in shopping around to make great savings.”
© Fair Investment Company Ltd