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28 November 2007
A recent report has shown that many credit card providers across the UK have really tightened up on lending over the past couple of months in light of the turmoil that has hit the financial sector as the result of the credit crunch, which has swept across the UK and other parts of the world. A combination of the effect of the credit crunch and high bad debt levels has seen many card providers slash borrowing limits and reject high numbers of applications.
Over recent weeks a number of reports have shown how credit card providers have been trying to recoup losses resulting from bad debt and the effects of the credit crunch by hiking up an array of fees and charges, thus making more profit on things such as transfer fees, cash withdrawals, foreign transactions, and general standard variable interest rates. However, it seems that this is not enough of a safeguard for many card providers, and increased stringency has been put into place by these lenders to provide themselves with additional protection.
According to credit reference agencies there has definitely been a reduction in the level of credit card applications that are being accepted by card companies, and these agencies have warned that card companies are also tightening up on borrowing limits, and customers that are not considered profitable could see their credit limits slashed by their card providers.
James Jones, the Consumer Education Manager for the information services company, Experian, stated: "Most lenders are scrutinising customers' credit reports ever more closely and on a more frequent basis. Lenders are under pressure to avoid lending to people who can't afford to repay." One industry official recently commented: "It seems as if the credit crunch is beginning to cause credit card chaos. 125 fee and rate increases inside two months is quite staggering. With the majority of increases staying away from the headline purchase rates, these fee and rate increases are less in the public view, and often tucked away in lengthy terms and conditions. However they can still make a substantial increase to the cost of using your card."
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