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8 October 2007
Amidst growing concerns over consumer debt in the UK, and further fuelled by the recent turmoil that has hit the UK's financial sectors, Barclays Bank has been cutting customers' credit limits on cards and increasing the number of applications that it is rejecting.
It is estimated that around half a million consumers have had their credit limits cut by the banking giant.
According to officials from Barclays the credit limit cuts are part of an ongoing review that started in 2006. However, many experts believe that the recent chaos at Northern Rock combined with concern over consumer debt levels, high bad debt levels, and the recent chaos caused by the global credit crunch have all contributed to the bank's decision to cut the credit limits of many customers and turn down more applications for credit cards.
Many experts believe that this is a trend that will quickly spread to other banks and credit card companies, making it more difficult for consumers to get credit cards and leaving them with reduced credit limits on existing cards.
A recent report indicated that many credit card holders have been finding it increasingly difficult to switch from one card to another due to increased stringency from card issuers.
One Barclay's spokesperson stated: "We have been going through a review since 2006 and lowered credit limits for 500,000 cardholders where customers are over their limits or where they have become over extended."
The bank also confirmed that around fifty percent of applications for credit cards were now being rejected as a result of tighter lending criteria.
In the first half of this year Barclays saw its profits plummet by seventeen percent as a result of bad debts, which hit the £1.5 billion mark. This is thought to have been a major factor in the bank's decision.
Experts also predict that many consumers that are on fixed rate mortgages that are due to end will find it increasingly difficult to repay their credit card debts, as they struggle to meet increased mortgage repayments and avoid repossession.
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