British Consumers See Credit Limits Lowered

Britons have seen their credit limits slashed by around £3.1 billion ($6.2 billion) as credit card issuers and banks begin to be concerned about consumers’ ability to repay their debts.

Around 4% of people in a survey said that their credit limit has recently been reduced by their card provider as financial services companies impose stricter lending criteria.

Young people are found to be at a greater risk of having their spending limit lowered, with 6% of 25 to 34-year-olds saying their provider had recently cut their limit, according to reasearch by MoneyExpert.com.

Customers typically had their credit limits reduced by £500 ($1000) or less, with 47% of people receiving reductions of up to £1,000 ($2000).

In a high-profile case of credit limit reduction,  internet bank Egg notified over 160,000 customers in February and told them that their credit cards would cease to work in 35 days. Egg claimed that these customers had a “higher than acceptable risk profile”.

The new research suggests Egg is not the only bank reviewing the risk profiles of customers. New data from the Bank of England shows borrowing through credit cards, overdrafts and loans has soared to its highest level in more than five years.

Unsecured debt increased during the month, prompting speculation that consumers have become overstretched, and were relying on credit to meet their daily living costs.