Credit card companies continue to clampdown

A recent report has shown that credit card companies are continuing to minimize risk to themselves by really tightening up on lending.

A few weeks ago it was reported that many credit card companies had hiked up a range of fees and charges, such as foreign transaction fees, cash withdrawal charges, interest rates, and transfer fees, amidst concerns over the effects of the credit crunch that has swept across the UK and high bad debt levels that were costing the companies money in lost profits.

It now seems that credit card companies are taking additional precautions to protect themselves against financial losses by slashing credit limits on many consumers' cards and rejecting a higher number of applications. Increased stringency has resulted in more and more people being turned down for a card, and those that do have a card or are successful with their application may find that their credit limit is slashed.

According to one Experian spokesperson credit card companies are really feeling the pressure in the current financial climate. He stated:  "Most lenders are scrutinising customers' credit reports ever more closely and on a more frequent basis. Lenders are under pressure to avoid lending to people who can't afford to repay."

Credit agencies have confirmed that card companies are slashing the limits of customers that they class as less profitable, and are increasingly rejecting new applications.

Another industry professional previously stated: "It seems as if the credit crunch is beginning to cause credit card chaos. 125 fee and rate increases inside two months is quite staggering. With the majority of increases staying away from the headline purchase rates, these fee and rate increases are less in the public view, and often tucked away in lengthy terms and conditions. However they can still make a substantial increase to the cost of using your card."

Tom Smith
27th November 2007

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