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First signs of the credit crunch?

Joker

War Hero
#1
In the past two weeks I have received letters from Credit card firms (Barclay Card and Egg) stating that a) they are reducing my credit limit (Barclays) and b) they are ending my agreement (egg).

Being a good boy, I have always either fully maintained the accounts or paid them off in full. That includes all other accounts as well.

So am I falling victim to the credit crunch even though I am deemed as credit worthy?
 
#2
You are just a crap customer from their perspective and they are not able to make any money from you.

msr
 
#4
likewise, me to! same companies, same letters and again, Ive always paid on time, kept within the limits and so on. Also had a letter from Goldfish telling me the same, even though Ive never used the card.
 
#5
Interesting that they are doing this. I presume that this means that the Credit Card companies are starting to feel the lack of available credit, and are consequently tightening their belts.

If people are defaulting on their mortgage payments, they're going to be defaulting on their credit-card bills too.

I suspect that we may start to see credit limits come down across this board in the next few months.

PB
 
#6
Does that mean YOU HAVE HAD TO PAY BACK THE FULL BALANCE ON YOUR CARD AS IT IS THE END OF THE AGREEMENT?
 
#7
Nope, as MSR said it is because you are a crap customer. You have not proven to them you are a good borrower. The more you borrow and pay back the better your credit rating. Since you are not borrowing/paying back your credit rating with them does down but your normal credit rating should stay the same.
 
#8
Yep Credit Cards have a very high level of B&DD (Bad & Doubt Debt). It's unsecured and if it all goes Pete Tong it's often hard to recover debt on a plastic. Hence horrible APR's on cards. A good customer who settle's their bill every month makes the bank very little. They only get the interchange rate.

For example if you spent £100 in Pizza Hutt on an HSBC Credit Card & the Merchant Services Terminal (Credit Card Machine) was from Barclays then you would find that the owner of the Pizza Hut franchise would only get £98. As Barclays would charge a 2% handling fee. Which they have to give 50% off to the Card Issuer.

Same if you use an Abbey National Card in the US. If you spent $100 in NYC at Macy's then the Bank of America would charge 2% or $2 and give 50% or $1 (50p stg) to the Abbey National.

There are a lot of costs involved in authorisations, producing plastics, printing statements etc.

To that end someone with a £2K debt on a card paying interest provides the bulk of income to a Credit Card Issuer.
 
#9
hammy123 said:
likewise, me to! same companies, same letters and again, Ive always paid on time, kept within the limits and so on. Also had a letter from Goldfish telling me the same, even though Ive never used the card.
That means you are a bad creditor! You ought to at least let the poor bankers bring home some bread for their hungry children. You can do that by consistently failing to pay on time thereby incurring interest/charges and then paying off those interest/charges.
 
#10
The letter basically dropped the limit by £400 in accordance with new guidelines. The cards are usually in use, up and down, paid off now and again so they get plenty out of me and the missus.
 
#11
Scabster_Mooch said:
hammy123 said:
likewise, me to! same companies, same letters and again, Ive always paid on time, kept within the limits and so on. Also had a letter from Goldfish telling me the same, even though Ive never used the card.
That means you are a bad creditor! You ought to at least let the poor bankers bring home some bread for their hungry children. You can do that by consistently failing to pay on time thereby incurring interest/charges and then paying off those interest/charges.
I know, it pains me and I cant sleep knowing they will be stuggling to make the bonus scheme this year.
 
#12
58_Pattern said:
Yep Credit Cards have a very high level of B&DD (Bad & Doubt Debt). It's unsecured and if it all goes Pete Tong it's often hard to recover debt on a plastic. Hence horrible APR's on cards. A good customer who settle's their bill every month makes the bank very little. They only get the interchange rate.

For example if you spent £100 in Pizza Hutt on an HSBC Credit Card & the Merchant Services Terminal (Credit Card Machine) was from Barclays then you would find that the owner of the Pizza Hut franchise would only get £98. As Barclays would charge a 2% handling fee. Which they have to give 50% off to the Card Issuer.

Same if you use an Abbey National Card in the US. If you spent $100 in NYC at Macy's then the Bank of America would charge 2% or $2 and give 50% or $1 (50p stg) to the Abbey National.

There are a lot of costs involved in authorisations, producing plastics, printing statements etc.

To that end someone with a £2K debt on a card paying interest provides the bulk of income to a Credit Card Issuer.
All true, but Joker has proved himself to be a good credit risk by making his monthly payments. It will cost his bank more to find a new customer to replace him than to maintain his account, the marginal cost of which is fairly small, and should be covered by the interchange fees.

My guess would be that the Credit-Card companies have been told by their respective Boards to reduce their total credit exposures and that an easy way to do this is to reduce individual limits where they are not being used.

Bossdog, if you've borrowed money off a bank, they're going to want it back, or charge you interest.
 
#13
Very true Passing Bells. All banks are now looking at their 'exposure'. Their is a massive housekeeping exercise going on globally where banks have done some scary modellings of every customer maxing out their secured & unsecured lending and then suddenly customer says no. For instance folk with a £250K 100% Mortgage on a house thats now worth £225K at todays market value.

Very very choppy storms ahead.
 
#14
Just spurred me on to clear all my cc's. a painful activity for a friday as opposed to going on the lash

I feel mildly righteous
 
#16
Jesus glad I am not the only one then! To answer a previous question, they can ask for you to pay any debt in full however had I had any debt with egg they were happy for me to pay it off at the agreed rate until it was fully cleared. How very kind. :roll:
 
#17
I think that you are probably quite correct. This is a sign of things to come. These firms are now realising that they have over lent to people that they really shouldn't have. By removing the credit facility to those that they feel are a risk, but allowing them to pay off at the agreed rate, they start to reduce their risk.
Also by removing the credit line from those that pay off their balance in full, they again reduce their risk by not having to honour that limit, and at a stroke remove their least profitable customers.
I think that we will probably see much more of this before too much longer.
 
#18
I suspect that some of these firms are also realising that consumers are very much more aware of their rights than in the past; also, regulatory bodies are starting to take a harder line.

As well as the penalty charges issue, more and more people are discovering that lots of credit card agreements are unenforceable because they don't comply with the legislation.

Egg and MBNA are amongst the companies whose agreements, especially those pre-2005, are often non-compliant, as are Amex's.
 
#19
ViroBono said:
I suspect that some of these firms are also realising that consumers are very much more aware of their rights than in the past; also, regulatory bodies are starting to take a harder line.

As well as the penalty charges issue, more and more people are discovering that lots of credit card agreements are unenforceable because they don't comply with the legislation.

Egg and MBNA are amongst the companies whose agreements, especially those pre-2005, are often non-compliant, as are Amex's.
And Citicard's :aww:
 
#20

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