Credit Card limit slashed without warning

HangTime · 5 May 2011 at 01:01

Had a bit of a shock today when the wife rang me from the supermarket carpark to tell me that our joint credit card had been declined. For the last I don't know, 2 years or so, it had a credit limit of just over £10k. We pay it off every month.

As you can imagine with a £10k+ limit and paying it off every month, you wouldn't expect to go into Sainsburys and have your card declined when making a weekly shop, unless you go all supermarket sweep and pile up a couple of trollies with spirits and electricals. She does waste a lot of money on useless tat or mountains of food that end up in the bin, but a £9k supermarket shop would have been excessive, even for her.

So it turns out that yesterday the credit limit was reviewed, and instantly slashed from over £10k to £1350. Apparently a 'letter has been sent out' at some point yesterday, but obviously we haven't received it yet.

Now, don't get me wrong. I know that legally they are perfectly within their rights to do this. In the T&Cs there will be something along the lines of, we can adjust your credit at any time. It just seems to me that when making such a drastic change (~90% reduction) better customer service would be informing the customer of the event happening beforehand, to avoid the embarrassment of being stood at the checkout like a muppet.

Again, I'm not naive enough to think that paying our bill every month makes us a 'good' customer. It doesn't, because we aren't earning them money in interest. But if we clearly have no history of 'pulling a fast one' or racking up huge debts, why slash the credit instantly - why not give 7 days warning to say "from xx date your credit limit will be adjusted to £xxxx"? This would avoid getting such a shock when trying to use the card.

Credit is a priviledge and not a right - but it is not so much the fact that the limit has been adjusted, more the manner of it and lack of notice that I find annoying.

edit: Update in post #40

HangTime · 5 May 2011 at 01:23

It's not down to fraud as we have already spoken to the bank concerned to find out what was going on, the reason given was that having reviewed our spending over the previous 6 months they saw we'd never got anywhere close to the limit (which ironically they themselves had increased without being asked a couple of years ago).

It's just annoying that they choked it down so low just a few days before our bill arrives (and after we bought some furniture at the weekend) meaning that not only did we get no warning, but also the new limit was extremely close to the outstanding balance. If we had just cleared the past months spending it wouldn't have been so bad as at least we'd have a bigger window (big enough to do the shopping...)

I'm fairly relaxed about it as I don't view credit as essential but it's the sort of thing my wife can get a bit emotional about at the time due to the embarrassment of being in a shop and then having to spend money phoning up the bank to be put on hold for 5mins and then basically being told "a letter is in the post".

In all likelihood we will ditch this CC and move to a new one which maybe is what they want. Tempting to give them the finger and move my current/isa/savings/sharedealing accounts with them but probably more hassle that it's worth even if I'm not impressed with the level of service on the CC side of things.

HangTime · 5 May 2011 at 10:08

Seft said:
This is not uncommon practice within the industry. The theory goes as follows: If you have a 10k line, but only ever spend up to 2k, the most likely reason why you'd end up using the full line is because you've hit some serious financial difficulties. Essentially, you can think of the last 5k as actually fairly high-risk if it's ever used. Whilst this was more theory than practice for many years, I would imagine that some issuers got burned by this phenomenon during the recession and are now being more careful about loose lines. There's also some Basel II influence on the amount of unused exposure they're likely to want.

That said, I don't think they handled the experience very well.

A reasonable explanation, although if they had put this to my wife at the time I expect she would have launched into a rant about how she wasn't high risk and was paying all her bills.

What you say does make sense however I would have thought that in such case where there is no immediate threat on the 'high risk debt' (no evidence of financial problems) that giving people a 7 day notice period would be reasonable. Surely if we were in that much financial trouble that we'd need to hammer the CC over the next 7 days, we'd already have been building up more of a credit line? That way in the vast majority of cases they could successfully reduce their exposure whilst not alienating customers.

In fact in terms of notice period, because they send out a letter on the day the limit is slashed, effectively it is worse than getting a zero notice period, it's actually a negative notice period while we wait for the letter. No phonecall, no text, no email (although to be fair I don't know if they hold her email address). Because of this even if you ignore the embarrassment / inconvenience factor, my wife is actually out of pocket because she phoned the bank from her mobile (fearing it could have been blocked due to fraud or something). Will the bank be refunding the peak time mobile call? I don't think so.

Somewhat suprised at the reactions in this thread, as I was half-expecting some responses like "LOL n00bs swanning around spending money that isn't yours, if you had read the T&Cs you would have seen this common, I am 100% reliable with my finances and go online every 5mins to check my credit limit in case it changes without warning, HAHAHA IF YOU DIDN'T DO THAT THEN MORE FOOL YOU!!!!11"

HangTime · 5 May 2011 at 10:28

Don't see how that would have been any help in this regard as my understanding is that their records don't get updated in realtime (and even if they did, do they even have the facility to issue an automated realtime alert when a credit limit changes? I doubt it). £10/month would be just another expense eating into the profits we make off the banks, we don't need to know our credit rating, we have more than enough credit, it is just that the limit was slashed on a particular card that we happen to use for joint expenditure. If we knew about it, she could have just used a different card.

HangTime · 5 May 2011 at 10:45

The thing is my understanding is Experian only get updated by the banks once a month so (on average) you'd expect to get the letter from the bank before then anyway. Good to know, however

In terms of Fraud it was just the natural response when your card gets rejected unexpectedly, even if she had an Experian account and hadn't been notified of suspected fraud she would still have needed to phone the bank to work out what the hell was going on.

I will probably write some sort of complaint asking them to review their practices but I shan't expect anything other than a generic response that hasn't bothered to fully read the complaint in return.

HangTime · 23 May 2011 at 00:30

Sorry for bumping an old thread but I have an update (in case anyone cares or experienced similar) - my wife received a letter the other day stating that the balance had been reduced in error and was put back to it's original limit of £10600 2 days after it was reduced. Of course, this raises some further questions:

1) Why did the person she spoke to on the phone state that it had happened as a result of a review of past spending and that it was part of their practice to be a responsible lender? Clearly this was BS if it was done in error.
2) Why was she told a letter had been sent out the day the reduction was made, when clearly it wasn't (we never received such a letter so either it got lost in the post or was never sent)
3) Why did we not receive a letter apologising for the error and informing us the previous limit was restored until nearly two weeks after the error was corrected?

Just seems like very poor customer service all round; not only do they fail to notify you of changes, when they make an error and you phone up (at your own expense) to query it, they still don't realise the error has occurred and try to blag it.