It’s a tale of two credit cards: two members of the Guardian Money team have had their Barclaycards for years, and both use them regularly and pay off the balance every month.
Until fairly recently, both had a healthy credit limit – the sum available to spend on the card. Then, in December, both received letters about those limits: Hilary Osborne’s was increased, Rupert Jones had his slashed.
We wanted to know what was going on – and what it told us about how banks decide how much they will let us put on our plastic.
‘My credit limit was cut without warning’
I’ve been wrestling with Barclaycard since it slashed my credit limit by 90% without warning – cutting it from £4,250 to only £450, writes Rupert Jones.
It was a couple of days before Christmas last year that I got the letter telling me about the reduction: “We know this might not be ideal …” – too right.
I had a pretty good idea why it had done this: I’d recently discovered that in the autumn of 2023 I had been a victim of identity theft. Some crook managed to take out a John Lewis credit card in my name (at least the fraudster chose a Guardian-friendly brand) and also tried their luck with HSBC, which thankfully rejected their credit card application.
That was, of course, a massive pain to sort out but I managed to do so pretty quickly. I immediately applied to the UK fraud prevention organisation Cifas for “protective registration”, which means it places a warning flag against your name in its national fraud database. This costs £30 for two years and means banks and other companies carry out extra checks when your details are used to apply for products or services, to make sure it is really you.
John Lewis’s card provider, NewDay, investigated, accepted I was the victim of fraud, and removed the account from my credit file. It wasn’t long before my file had two “victim of impersonation” markers placed on it.
Soon after I learned about the fraud, I heard from Barclaycard.
I immediately got in touch and was told I had to write it a letter explaining everything and requesting that my credit limit be increased. I did that but received a text on 16 January saying that “unfortunately” it was unable to give me an increase. It said I could ask it to review this in three months’ time, which I did, and again it was a “no”.
I’m not cross with Barclaycard for slashing my limit – it wouldn’t initially have been aware of the backstory and probably thought I’d taken out another card and missed payments.
What I am cross about is that, once it was clear that I was a victim of identity theft – it literally says so on my credit file – and that this had all been sorted out, it still wouldn’t increase my credit limit.
I’m the very definition of a loyal customer: I’ve had a Barclaycard for well over 20 years, it’s the only credit card I really use, and (to the best of my knowledge) I have an unblemished payment record.
Having a credit limit of £450 was proving to be a real pain. I’d booked hotels for a trip and was getting emails from them saying they may take a deposit in advance from my card to verify it was valid. I was worried that if my credit limit wasn’t big enough to cover these deposits, the hotels would cancel my bookings.
Last month I tried again to get Barclaycard to increase my limit. I rang up and had a long chat with someone who asked for mountains of personal information. They asked me what I would like it raised to. I requested £1,500 – just over a third of my original credit limit.
The next day, I got a text saying the company had agreed to my request.
So I’m now a lot happier, although I’m still cheesed off about the way this was handled. For example, Barclaycard cut my limit to £450 when my card balance was already very near that amount: my limit was reduced on 21 December, and the following day it emailed to say that my available credit was only £24. If I had not spotted that email and had not quickly paid off my card bill, it’s possible that a couple of regular payments going out of my card account could have pushed me over my new limit and damaged my credit score.
While my credit limit was cut because of the fraud that took place, there are other reasons why a card provider might do this, including late or missed payments, changes to your credit score and changes to your spending habits that might indicate you are having a tricky time financially.
A Barclays spokesperson told me that the fraud I’d fallen victim to was the reason why my credit limit was decreased. They told me: “We have every sympathy for your situation and appreciate that it took some time to raise your limit, which was due to caution that was applied in our decision-making. We are pleased to have since been able to raise your credit limit to your requested amount.”
It also indicated that my limit was increased to £1,500 based on my request for that amount, so that does not necessarily mean that £1,500 is the maximum I am eligible for.
NewDay told me it was “committed to working diligently to resolve any instances of fraud. In this case we investigated and took action, removing the fraudulent account from Mr Jones’s credit file”. It says it encourages people to regularly monitor their credit records to detect and report any suspicious activity early.
‘The new limit was nearly as much as I spent all year’
The letter offering me a new credit limit arrived out of the blue. I didn’t think I’d been using my Barclaycard any differently from usual, which was always well within my existing limit of £6,500, but now it was going to let me borrow an extra £1,500, writes Hilary Osborne.
The letter, and several follow-up texts, made it clear that I could opt out – “For questions, or if you’d prefer to keep your old limit, call the number on the back of your card” – but I was surprised by this sudden offer of extra debt.
I use my Barclaycard regularly – it’s how I pay for holidays, household stuff and expenses I need to claim back. It’s not unusual for me to have a four-figure balance but it is cleared every month. The new £8,000 limit was almost as much as I’d spent on the card in a whole year.
Was the bank hoping I would abandon my habit of clearing the debt and be tempted to leave something to attract interest? Was it after referral fees for bigger purchases?
When I asked industry experts, they said that card providers often offered low limits to begin with and increased them over time as customers demonstrated that they could afford repayments.
John Webb, a spokesperson for the credit referencing agency Experian, says card providers regularly review their customers’ accounts, “not just individually but en masse, and they may adjust credit limits as a result”.
He says the companies will look at how the account is being used, as well as how the customer is managing any other debts. “They don’t run a hard [credit agency] search on you, like when you first applied, but they will look at your file.”
Webb says having a high credit limit could be a good thing, as other lenders may see it as a sign that I have run my account well. But he adds: “How you use that credit limit is important. If you are very close to your credit limit, that could go against you.” If, for example, I had a balance of £7,500 out of my new credit line, that may put off other lenders.
“It’s called credit utilisation – the percentage of the limit you are using,” he says. “If your balance is low and you have a really high limit, that’s generally good. The lower the better but a balance of 25% or below is typically positive.”
Barclays says it cannot give details about how decisions on limits are made for commercial reasons. A spokesperson says: “We regularly review credit limits for our customers based on their personal circumstances to ensure they remain appropriate, with limits going up or down for a variety of reasons.
“Customers can choose to manage their credit limit increase preferences through multiple channels such as our app or in-branch, with options to automatically accept, refuse or make a choice at the time the offer is made.”
If I had been worried about being tempted to overspend, I would have turned it down. As I was getting some work done to my house, I decided to go with the higher limit in case I needed it. I didn’t, but it is reassuring to know it’s there for an emergency.
What you can do if your credit limit is cut
If you feel you can afford a higher limit, ask your credit card provider for an increase, and provide information to back up your request, although if you get a “no”, you may have to wait a while before you can ask again. In the case of Barclaycard, it is three months.
During that time, try to make sure you don’t get too close to your new credit limit, as that won’t help your case. For example, Barclaycard messages people to say they have used more than 80% of their credit limit.
The consumer body Which? points out that you can of course consider moving to a different credit card provider.
