Barclaycard reduces credit card spending limits - your rights if you've been affected

Barclaycard is slashing hundreds of thousands of customers' credit card spending limits from the end of May, with some customers facing cuts of over 90%.

The move comes less than a year after the provider sent letters to some customers apologising for their credit limit being too high.

Many customers have reported that Barclaycard is cutting their limit even though they haven't missed any payments and have steady finances.

We heard from one customer who told us his limit reduced from £12,500 to £250, despite claiming he's never missed a payment in the four decades he's been a customer.

Here, Which? looks at why the provider is slashing credit limits and explains your rights if you've been affected.

Why is Barclaycard slashing credit limits?

Your credit card limit should be tailored to you. If you have a larger income and good credit history you should be able to borrow more. Generally, if your circumstances change or you fall behind repayments your limit can be cut.

However, regardless of your current standing, your lender or creditor can change your credit limit anytime, unless the two of you have agreed to a different arrangement.

Barclaycard says that it takes into account changes in the economy to make decisions to cut credit limits, as this impacts customers' 'ability to manage their borrowing effectively'.

On this occasion, it says it's had to take into account the ongoing economic impact of coronavirus, and that this has resulted in an increase in the number of customers receiving credit limit decreases.

Barclaycard hasn't disclosed exactly how many customers are affected, but in Twitter responses to customers, it said it's had to cut 'over 100,000 customers' limits.

A spokesperson at Barclaycard told Which?: 'We have a duty of care to our customers to make sure their credit limits are affordable so that they are able to manage their borrowing effectively. To make an affordability assessment, we review our customers' finances across their full lending portfolio to ensure we are lending responsibly and that they are not borrowing more than they can comfortably afford.'

• Find out more:best credit card deals

What customers say about the change

Since Barclaycard's announcement, there's been uproar on social media, with many customers expressing their frustrations.

We spoke to one Barclaycard customer, Jon, a semi-retired television producer who told us: 'I've had a Barclaycard 40 years and monthly payments have always been cleared out of my Barclays account during that time. I have never defaulted in four decades. I have over £300,000 in my Barclays account. Out of the blue I've been cut to £250 from a £12,500 monthly spend.'

He added: “Barclays has told me I cannot raise a 'complaint'. It's not a word they recognise. They said I can register a 'concern!' I would have ditched Barclaycard but I travel a lot to third world countries where 'Visa' tends to be recognised rather than 'Mastercard' and where they also accept a 'sign only ' card - which mine is - when internet connections are poor or non-existent.”

Below is another account of a customer who's been affected, with a 98% reduction despite claiming to have a good credit history.

I've been affected by the changes: what should I do?

If customers feel they can afford a higher limit than communicated, Barclaycard is asking they get in touch so it can re-review their assessment.

It says it's extending the time customers have to provide this additional information until the end of May and will not be reducing any limits before this.

Customers can reach Barclaycard by contacting them on the details provided in its correspondence to them, it says.

You can also consider moving to a different credit card provider. We've got reviews on the major UK providers, which can help you make your decision. Also, check out our Which? Recommended Providers in our annual analysis of best and worst providers.

How do providers set your credit card limit?

Credit card limits vary between providers, depending on how they view your personal circumstances. When you apply for a credit card, the provider will set your limit depending on:

• Your credit history: if your credit history shows you're a reliable borrower you're likely to get a higher limit than if you've missed payments, have fallen into arrears or have Count Court Judgements (CCJs) on your record. If you've never borrowed money before that can also bring your limit down, as the provider won't be able to see records of you making repayments.
• Your cash flow: providers usually ask you to disclose how much money you have left over at the end of each month after your essential bills. The more money you have spare, the higher your limit should be.
• Your other borrowing: any money you owe on debts such as mortgages, loans and other credit cards will also be taken into consideration, as well as limits set on any other credit cards you may have.
• Their lending policy: the credit limit your provider may give you can vary as some providers may be more risk-averse than others. Bear in mind that different credit card deals may come with varying credit limit offers.

Some providers may increase your limit if they categorise you as 'good risk'. For example, if you've used your card responsibly and paid back your monthly repayments in full. Although, not all providers ask before doing this - sometimes you'll be notified about your new balance after the change has been made.

• Find out more:How to pay off your debts

Does my credit limit affect my credit score?

As long as you don't increase your spending by too much and keep on top of your monthly repayments your credit score shouldn't be affected if your credit limit is increased.

However, if a lender decides to reduce the credit limit on one of your accounts, your credit utilisation ratio - which measures how much credit you're using relative to your limits - may spike, which can bring your credit score down, according to credit reference agency Experian.

So say you had a £12,500 limit on a credit card with a £200 balance, this would mean you have only used 1.6% of the credit. However, should that limit drop to £250 your £200 balance would mean you are using 80% of the credit available, which could drag down your score.

Credit scoring models and lenders also consider your credit usage across all your accounts to determine your overall credit utilisation, so if you have other credit cards with larger balances this may cancel out the impact of a credit limit cut.

• Find out more:how credit reports work

How can I boost my credit score if my credit limit's been lowered?

If your credit score is low as a result of a provider cutting your credit limit, there are ways to restore it.

You can try applying for a new credit card. Even if you don't actively use this account, increasing your combined credit limit could have a positive impact on your debt-to-credit ratio.

Just bear in mind that if you are turned down for a new card it will show on your credit report, and your credit score may come down further.

Alternatively, if you have another credit card already, you could ask for a credit limit increase with that provider.

According to Experian, over time, reducing your credit utilisation ratio can lift your score as long as you manage the extra credit responsibly.

Experian also suggests looking at your credit card spending. If you're carrying over balances from month to month you should try to pay off some or all of your debt, to lower your credit utilisation ratio.

• Find out more: how to boost your credit score