Business

Credit cards firms accused of hiking the spending limits of those most in debt

Credit card firms are routinely jacking-up the spending limits of those already up to their necks in debt, an investigation has found.

Nearly one in five people struggling with debt has had their credit limit raised without them asking for it, Citizens Advice found.

And card firms are more likely to increase the cap for those who are already struggling to meet their repayments.

Citizens Advice is calling for firms to be banned from raising credit limits without people’s clear consent.

The discovery comes amid growing concerns about a potential credit bubble.

Households have amassed more than £200billion in unsecured borrowing.

A third of that – £67billion – is on credit cards.

Card firms have been accused of using ever longer interest free periods on balance transfers and purchases to suck people in.

Yet when those periods come to end, borrowers can be hit with sky high interest rates.

According to Citizens Advice, 18% of customers battling with long term debt had their credit limit raised without them requesting it in the past year. That compares to just 12% for all credit card holders.

The charity helped nearly 66,000 people with more than 140,000 credit card debt problems in the past year.

Higher spending limits can makes matters worse for those in trouble

In one example, a man who owed £15,000 on four different cards and could only make the minimum monthly repayments was told by all his lenders they were increasingly his credit limit.

He turned to Citizens Advice when his debts spiralled to £30,000.

In another case, a pensioner who could only just afford the minimum repayments on her existing loans was bombarded with calls from firms offering more cards.

She used the them to meet her essential bills but ended up with 21 credit cards and debts totalling £70,000.