Over 2.5 million credit cardholders have been hit with higher fees, lower credit limits, or account closures in the last year – even though most were low risk customers.
As the credit crunch continues to inflict pain on banks, many have drastically tightened their lending criteria and clamped down on customers' credit.
But new research from price comparison site uSwitch shows that many “good” customers - who use their credit card regularly and make at least the minimum repayment every month - may have been unfairly punished in the process.
Of those cardholders targeted by banks, only one in six (16%) had actually exceeded their credit limit or missed more than one payment in the last 12 months, uSwitch found.
Many customers kept in the dark
By contrast, 51% were using their card regularly and making at least minimum repayments, and a further 20% paid their bill in full every month.
Providing a reason for the crackdown, lenders told one in four (25%) customers that their credit rating was too poor, while 16% were told their account wasn’t used often enough.
A massive 27% simply weren’t given a reason.
Lenders need to be more forthcoming
“We’re not against credit cards providers curbing consumers’ spending if their debts are genuinely getting out of hand,” says uSwitch personal finance head Simeon Linstead.
“However, resorting to account closures, reducing credit limits and implementing annual or monthly fees without providing one in four people with a reason for doing so is not good for consumer confidence or financial planning.
“Credit card companies who are taking action to close down or make changes to customers’ accounts must be completely open about how and why they have selected those customers.”
Still good deals out there
While jittery lenders have no doubt cut back on the number of credit cards on offer, there are still a number of attractive deals available to help you pay off debt more cheaply.
As a prime example, Virgin is still offering 15 months interest free on all balance transfers, with a 2.98% admin fee. On the new purchases side, HSBC will give you 12 months interest free, making it one of the best deals around.
The catch, of course, is that lenders are increasingly reserving their best deals for the lowest risk customers, so it’s imperative you maintain a good credit rating.
Check your credit rating
To find out whether your rating is up to scratch, get a copy of your credit report from any one of the credit reference agencies, such as Experian or Equifax.
uSwitch found that 29.6 million (78%) UK adults have not done so in the last 12 months, while over half of these (54%) never have.
This could prove costly – of those who did so, 13% found mistakes such as payments listed incorrectly as ‘missed’ and inaccurate credit limits.
If you find your credit rating is poor, find out how to improve it here.
