Card providers have clawed back more than £3 billion worth of credit by cutting their customers' spending limits, research shows. Four per cent of people - around 1.8 million card holders - have had their credit limit cut, to an average £1,600 or a collective £3.1 billion, according to price comparison Web site MoneyExpert.com.
The findings come amid the fall-out from the credit crunch, which has put an end to cheap and easy credit after a period, in which consumers have run up a personal debt mountain of £1.3 trillion.
Sean Gardner, chief executive of MoneyExpert.com, warned more pain could be on the way. "Overstretched consumers might look to resort to credit in a bid to make ends meet, but they should not rely on it as a way of keeping spending," he said.
"Credit card companies are becoming stricter in who they lend to and the amount of money their customers can borrow."
"The warning lights should be shining brightly if you find you're going from card to card without making a dent in the amount you owe."
There are still some good 0% credit card deals around. HSBC Bank is currently offering an introductory interest-free period of 12 months, Halifax gives nine months, while Lloyds TSB, NatWest and Royal Bank of Scotland have cards giving six months interest-free. Most borrowers have seen their limits cut by £500 or less and almost half (47%) by less than £1,000.
But with around 15% witnessing reductions of more than £2,500, the average drop is £1,680. Young borrowers are most at risk of having their limit reduced, with 6% of 25-34 year olds - around 568,600 people - saying their provider has reduced their spending allowance.
Source : Economic Times