Credit card lenders accused of pushing their vulnerable customers deeper into debt by secretly increasing spending limits
Research from charity Citizens Advice found almost one in five people with debts has had their credit card limit hiked
CREDIT card firms have been accused of pushing their most vulnerable customers further into debt, according to a new report.
Research from charity Citizens Advice found almost one in five people with debts has had their credit card limit hiked without asking for it.
And firms are more likely to increase the spending cap for customers who are already struggling to meet their repayments.
Some 18 per cent of struggling credit card users had their limit raised in the past year without requesting it, compared to 12 per cent of all credit card holders, the charity found.
Citizens Advice is now calling on the Financial Conduct Authority to ban the practice, to protect people from falling into “long term debt cycles”.
After the Bank of England issued a warning to lenders about how they are granting credit to consumers, Citizens Advice says poor affordability checks by firms are making people’s financial situation worse.
Gillian Guy, the chief executive of Citizens Advice, said: “Banning firms from raising existing customers’ credit limits without seeking their express permission first would also help people take more control over their finances.
“Lenders must act responsibly and direct people struggling with debt towards free and independent advice and support - rather than more credit.”
How to manage your money and pay down debts in 6 steps
Here are some tips from Citizens Advice
Check your bank balance on a regular basis - knowing your spending patterns is the first step to managing your money
Work out your budget by writing down your income and taking away your essential bills such as food and transport.
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs.Pay off more than the minimum - If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker.
Pay your most expensive credit card sooner - If you have more than one credit card and can’t to pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate).
Prioritise your debts - If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them. Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay.
Get advice - If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further. Citizens Advice can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans.
Customers with credit card debts were also more likely to get into long-term debt than those with personal loans, and were less able to pay their debt down.
One pensioner helped by the charity was repeatedly called by firms offering more credit cards - despite the fact that she could only afford to make minimum repayments on her existing cards.
She used these to meet her essential bills and ended up with a total of 21 credit cards and debts totalling £70,000.
Hannah Maundrell said, editor-in-chief of , advised customers to always check their statements for any transactions they don't recognise and keep on top of their balance to make sure they don’t get too close to their limit.
She told the Sun Online: “Double check to see if your credit card provider has increased your spending limit without asking you and if they have, ask for the limit to be reduced back down again.
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“If you’re paying interest on your credit card it’s worth comparing lenders that would allow you to transfer your balance to a card that gives you more time to pay it off without paying any interest.”
In June, the Bank of England ordered banks to set aside £11.4 billion to cover risk of bad debt boom.
Lenders are now expected to set aside £5.7 billion in the next six months, with a further £5.7 billion to be put away by the end of 2018.
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