Unrequested credit limit increases pushing people further into debt

[Legal Beagles]

Unrequested credit card limit increases are making debt problems worse for thousands of people and must be stopped, says StepChange Debt Charity. The charity is calling on the Financial Conduct Authority to ban the practice and make credit limit increases something that people must opt-in to. The charity also says…
Read More -> Unrequested credit limit increases pushing people further into debt


More...

[Snoopy1948]

Re: Unrequested credit limit increases pushing people further into debt

I remember back in the seventies when credit cards hit the streets for the masses and I was granted an Access card with a credit limit of £200 that made me feel I had so much spending power. But it was, of course, an invitation to go out and buy using someone else's money, which was exactly what it was. But over the years I have seen credit card debt rise and rise and for people with several cards ( whereby the invitations literally dropped on their mats ) , debts of £20000+ were entirely possible.

Your post is a fragrant reminder that this continues ..... unrequested credit limits should be outlawed as should unsolicited invitations to take out a card. There needs to be lot tighter legislation all round as credit card companies only have themselves to blame where customer borrowing is poorly assessed. I remember having a conversation with a post office representative canvassing people in the post office to take out the Post Office Credit card. I reminded her that such invitations lead to debt that could be avoided if she wasn't instructed to canvass people in this manner, probably what she didn't want to hear. And what piles on the agony is these credit cards that come with a long interest free balance transfer offer, up to three years I believe. People wouldn't need to do that if they handled their affairs properly and such transfers are just a way to defer the debt until the proverbial hits the fan yet again ....

[dogtired]

Re: Unrequested credit limit increases pushing people further into debt

Just had a letter from my bank inviting me to increase my overdraft limit, much the same thing I think. Almost always hovering on the limit as it is increasing it will only make matters worse.

[Snoopy1948]

Re: Unrequested credit limit increases pushing people further into debt

I guess banks like people who are in the overdraft zone as it's just another form of income generation, particularly if they invite you to settle the overdraft with a personal loan, which I understand is their usual ploy. I've always likened overdrafts to moving the X-axis down a few notches on the y-axis and that's not a great place to start from!

[des8]

Re: Unrequested credit limit increases pushing people further into debt

Aah, the good old days.... use my flexible friend to pay Barclaycard... to pay overdraft and so spiral down.
Luckily (?) improved job position which helped clear it all.
But that improved job position meant "I owed my soul to the company store" ...... until OH said "family or company : you choose"

Guess why we left City life to return to Wales

[charitynjw]

Re: Unrequested credit limit increases pushing people further into debt

Aah, the good old days.... use my flexible friend to pay Barclaycard... to pay overdraft and so spiral down.
Luckily (?) improved job position which helped clear it all.
But that improved job position meant "I owed my soul to the company store" ...... until OH said "family or company : you choose"

Guess why we left City life to return to Wales

All you need is a 20-pound goat & an Egg card?

:taunt:

:eek2: :bolt:

[Snoopy1948]

Re: Unrequested credit limit increases pushing people further into debt

Perhaps Credit Cards need to be 'toned down' by law, like the recent change in cigarette packaging. I see that we can get some cards with a picture of whatever you want on it, even Joey the bloody budgie, or they come in various designs that are seductive and addictive, suggesting that it's sexy to carry and use one. And they always shimmer like celebrity gloss with those addictive raised letters and numbers ... oh I need a lie down ......

[Snoopy1948]

Re: Unrequested credit limit increases pushing people further into debt

Reading a report on credit card spending today that increasing your credit limit can increase your credit score providing you do not borrow any more on that card. It works, so they say, by decreasing your 'utilisation rate' which is the percentage of the amount owed over the credit limit, and a lower utilisation rate, they say, correlates to a better credit score particularly if you maintain it between 20-30%. Perhaps we should therefore be grateful for that!

On another front, and this has happened to me in the past, is where a credit card company cancels your card account ( providing a zero balance exists ) due to the 'redundant' nature of your spending ..... in other words, you simply aren't using it. We may all feel comfortable with an unused card in our wallets, but is isn't doing the provider any favours and the cost of admin outweighs anything else. Hence, they'll kick you off their records and save money .... unless of course you heed their warning and go out on a splurge!

[Snoopy1948]

Re: Unrequested credit limit increases pushing people further into debt

Another thought on this credit card thread is where card companies send out invitations to complete 0% transfer onto your own card of other credit and store card debts. I am sure that we have all received these. It's actually very inviting to do this and relieve yourself of some 12, 24 or even more months of having to pay interest on the amount transferred. However, it has to be completed within your existing credit card limit ( taking the transfer fee into account ) and while it can, at a minimum, cost you minimum monthly payments and the transfer fee ( on inception, around 2-3% of the balance transfer ), it is again an open invitation to max out your card and take on debt from elsewhere that is probably going to bite you on the bum when the interest free term expires.

I believe that is just another form of debt encouragement that needs looking at and I wonder where the business case for this comes from ( for the credit card company ) as there are no guarantees either side, especially as credit card debt is labelled 'non priority'. The transfer fee on, say, a £3000 transfer, at around £75, may seem trivial to start but without good financial planning it could create disaster !

Let the borrower beware!