Lured into the debt TRAP

CREDIT card giants are hiking borrowing limits by up to £8,000 when customers have not asked for an increase. Money Mail has discovered that banks are routinely doubling customers’ credit limits unprompted.

In extreme cases, credit limits are being tripled and even quadrupled.

Customers must then pro-actively contact their bank within a month if they want to cancel the increase — something many do not remember or bother to do.

Experts have accused lenders of fuelling Britain’s growing debt crisis. They warn that automatically bumping up borrowing limits creates temptation for millions of people who are already battling to keep on top of their finances.

Exclusive research for Money Mail reveals half of people who own a credit card have had their credit limit increased without being asked over the past three years. One in three says their credit limit has been doubled, one in 20 says it was tripled and one in 100 quadrupled, according to a survey of almost 2,200 people by Consumer Intelligence.

One in four people (24 pc) were given a rise of more than £4,000. And of these customers, one in 14 (7 pc) received an increase of more than £8,000.

Worryingly, the research also reveals one in three customers spent more on their credit card after their borrowing limit was pushed up unprompted.

Such increases also appear to be on the rise, with one in three saying they had noticed their credit limit had increased more frequently in the past 12 months.

It comes as official figures last week revealed that families now owe a record £213.5 billion on credit cards, car finance and short-term loans.

Households borrowed £800 million in the past year alone, suggesting the country is fast becoming a nation of borrowers.

Gillian Guy, chief executive of Citizens Advice, says: ‘Credit card companies must start lending more responsibly. There is no good reason why lenders shouldn’t get approval from customers before increasing their credit card limit.

‘We also know that people in debt are more likely to have their limit increased than those who aren’t, which leaves them vulnerable to deeper financial troubles.’ A report by Citizens Advice, last November, revealed that six million people had their credit limit increased over a 12-month period without asking for it. The survey found customers receive an average increase of £1,481.

The Financial Conduct Authority has taken steps to stop banks pushing up customer credit limits without their consent.

From this week, customers in persistent debt — which means someone who has in the past 18 months paid more in interest, fees and charges than they have repaid of their borrowing — will no longer be allowed to be offered credit limit increases.

On top of this, all new customers must be asked if they want to ‘optin’ or ‘ opt- out’ of future credit limit increases.

If they select ‘ opt in’ it means that in future they will have to pro-actively opt in to increases.

This means customers will have to call, text or email their provider to take them up on an offer of a rise. If they select ‘opt out’, it means they will have to proactively opt-out of future increases.

If they do not, their limit will increase automatically within a few days of receiving a letter telling them it is happening.

But, for existing customers, campaigners say the changes are minimal and do not go far enough. Credit card providers must contact customers to ask if they want to ‘opt in’ for future rises.

But if borrowers fail to respond they will continue to get automatic increases, and charities warn that most people will likely ignore the letter. Martyn James, of complaints website Resolver, says: ‘We’ve seen a rise in the number of people who tell us that they’ve got into debt after the credit card company increased their card limits without asking. This repeats a pattern that was at its peak ten years ago.

‘This is a worrying trend, because research suggests we’re worse off as a nation, debt is at record levels and the credit industry is booming.’

The vast majority of us (74 pc) would prefer to only be given increases to our credit limits when we ask for them, according to Consumer Intelligence’s research.

On social media, shoppers have expressed mixed feelings over their credit limit increases.

RADIOpresenter Gerald Holdsworth, of Inverness, tweeted: ‘ Got a letter from @ AmericanExpress this morning with an “offer” to increase my credit limit.

‘I can accept or decline it, but if I do nothing it gets increased anyway! How about not increasing it if I do nothing? No wonder folk getting into debt.’

Others were delighted with their raised credit limits.

Steven Findlay, of Newcastle, tweeted: ‘Very kind of Capital One to double my credit limit’, while Doug Morton, of London, tweeted: My Amex credit limit is now £9,000. Hope I never need to use it, but it’s there if I do.’

Yet while most traditional banks offer unsolicited hikes in credit limits, some newcomers do not.

Paul Riseborough, chief commercial officer at Metro Bank, says: ‘Increasing customers’ credit limits without them asking, doesn’t sit right with us.’

A Financial Conduct Authority spokesman says: ‘We have agreed changes with the industry which give customers greater control over their credit limits. These measures are being monitored and, if necessary, the FCA would reconsider its approach to credit limit increases in due course.’