How to stop your credit limit from being slashed

James Daley gives advice on staying in the banks' good books and the best new deals around

Britain's credit card companies have been tightening their belts over the past few months – raising interest rates and fees, cutting back credit limits and turning down an increasingly large number of applications. Last week, Egg outraged consumer groups when it went one step further – unveiling plans to close the accounts of more than 160,000 loyal customers, who it no longer wanted on its books.

The internet bank, which was bought by Citigroup last year, said that these customers were being booted out to reduce the levels of risk across its credit card business. However, a large number of those affected claim to have never stepped outside of their credit agreement, raising suspicions that the bank also used its review as an excuse to clear out some of its less profitable clientele – those who regularly clear their balances and never rack up any interest.

Unfortunately, it's unlikely that Egg will be the last bank to make such a brutal move. American Express and a handful of other major lenders have slashed the credit limits of thousands of customers since last autumn, in a bid to claw back their exposure at a time when capital is still hard to come by, and the economic climate is worsening.

The banks have also been under pressure to keep up with new European regulations, which means they have to keep more money on their balance sheets for every pound of potential credit they grant to their customers.



Keeping a good credit rating

The uncertainty in the lending market means it's well worth keeping close tabs on your credit arrangements over the coming months. If you're the kind of person that likes to keep a few cards gathering dust at the back of your wallet, just for emergencies, Mike Naylor of Uswitch.com, the comparison site, says you should consider whether you really need them. "It can be a security risk to have lots of different cards, especially if you don't know where they all are," he says. "So it may be worth working out which ones you really need and getting rid of the rest."

It's also a good idea to take a look at your credit file, to see what kind of shape you're in. Egg says it has been targeting customers whose credit scores have deteriorated since they first became customers of the bank. With a whole multitude of factors affecting your overall credit score, it's easy to be completely oblivious to any changes in your rating. For example, failure to inform the credit agencies that you've split up with a former partner can mean your own score continues to be affected by their behaviour. Failure to get yourself on to the electoral roll when you move address will also work against you.

You can check your credit file by visiting the websites of any of three UK credit agencies – www.experian.co.uk, www.mycallcredit.co.uk and www.equifax.co.uk – or by using services such as www.checkmyfile.com. For a few pounds, you can check your credit file instantly, and start ironing out any inaccuracies or unwanted financial ties.

If you're one of Egg's unwanted customers, James Jones of Experian says you needn't worry about being left with an even worse credit file after your account has been closed down. In fact, the move may work in your favour. "Depending on the circumstances of the individual and policies of the lender, it could have a positive effect on your credit rating as a lender might view an application from someone with a lower number of cards as more attractive," he explains.



Finding a new deal

If you're looking for new credit cards, they're still relatively easy to come by for all but those with the worst ratings. And even then, if you're willing to put up with an APR of over 30 per cent, then there are still one or two lenders who are likely to take you on. Websites such as www.uswitch.com and www.moneyfacts.co.uk allow you to search for the best deals currently available, while www.moneysupermarket.com goes a step further by listing cards that fit specific credit profiles. This is useful for identifying lenders that are more likely to accept your application.

"Every time you apply for a card, it leaves a footprint on your credit file," says David Black, head of banking at Defaqto, the financial analysts. "So you don't want to over-apply for credit."

If you're looking for a card which offers 0 per cent for balance transfers, most now charge fees of between 2 and 3 per cent. There are, however, three cards which still offer 0 per cent transfers for no additional fee: Britannia Building Society (five months at 0 per cent), Ulster Bank (six months at 0 per cent) and Norwich and Peterborough Building Society (six months at 0 per cent).

If you're after a card that will pay you cashback when you use it, Black recommends the American Express Platinum card, which offers 5 per cent on purchases (of up to £4,000) made within three months of taking out the card. After that, customers receive 0.5 per cent on the first £3,500 spent a year, 1 per cent on the next £6,500 and 1.5 per cent on anything after that.

Alternatively, for car drivers, Black suggests the Shell Mastercard, which pays 3 per cent on all fuel purchases at Shell petrol stations and 1 per cent on all other transactions. However, you have to make at least one purchase at a Shell station each month to get your rebate.

Voices
voicesSiobhan Norton on why she eventually changed her mind
Life and Style
fashion Designs are part of feminist art project by a British student
News
Snoop Dogg pictured at The Hollywood Reporter Nominees' Night in February, 2013
people... says Snoop Dogg
News
i100
PROMOTED VIDEO
Life and Style
food + drinkZebra meat is exotic and lean - but does it taste good?
Arts and Entertainment
Residents of Derby Road in Southampton oppose filming of Channel 4 documentary Immigration Street in their community
tv
Arts and Entertainment
The Tour de France peloton rides over a bridge on the Grinton Moor, Yorkshire, earlier this month
film
News
i100
Extras
indybest
Sport
Scottish singer Susan Boyle will perform at the Commonwealth Games opening ceremony in Glasgow
commonwealth games
News
Lane Del Rey performing on the Pyramid Stage at Glastonbury 2014
people... but none of them helped me get a record deal, insists Lana Del Rey
Arts and Entertainment
Dwayne 'The Rock' Johnson stars in Hercules
filmReview: The Rock is a muscular Davy Crockett in this preposterous film, says Geoffrey Macnab
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    PMO Analyst - London - Banking - £350 - £400

    £350 - £400 per day: Orgtel: PMO Analyst - Banking - London - £350 -£400 per d...

    Cost Reporting-MI Packs-Edinburgh-Bank-£350/day

    £300 - £350 per day + competitive: Orgtel: Cost Reporting Manager - MI Packs -...

    Insight Analyst – Permanent – Up to £40k – North London

    £35000 - £40000 Per Annum plus 23 days holiday and pension scheme: Clearwater ...

    Test Lead - London - Investment Banking

    £475 - £525 per day: Orgtel: Test Lead, London, Investment Banking, Technical ...

    Day In a Page

    Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

    Noel Fielding's 'Luxury Comedy'

    A land of the outright bizarre
    What are the worst 'Word Crimes'?

    What are the worst 'Word Crimes'?

    ‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
    Can Secret Cinema sell 80,000 'Back to the Future' tickets?

    The worst kept secret in cinema

    A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
    Facebook: The new hatched, matched and dispatched

    The new hatched, matched and dispatched

    Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
    Why do we have blood types?

    Are you my type?

    All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
    Honesty box hotels: You decide how much you pay

    Honesty box hotels

    Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
    Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

    Michael Jamieson: Why weight of pressure rests easy on his shoulders

    The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
    Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

    The 'scroungers’ fight back

    The welfare claimants battling to alter stereotypes
    Amazing video shows Nasa 'flame extinguishment experiment' in action

    Fireballs in space

    Amazing video shows Nasa's 'flame extinguishment experiment' in action
    A Bible for billionaires

    A Bible for billionaires

    Find out why America's richest men are reading John Brookes
    Paranoid parenting is on the rise - and our children are suffering because of it

    Paranoid parenting is on the rise

    And our children are suffering because of it
    For sale: Island where the Magna Carta was sealed

    Magna Carta Island goes on sale

    Yours for a cool £4m
    Phone hacking scandal special report: The slide into crime at the 'News of the World'

    The hacker's tale: the slide into crime at the 'News of the World'

    Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
    We flinch, but there are degrees of paedophilia

    We flinch, but there are degrees of paedophilia

    Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
    The truth about conspiracy theories is that some require considering

    The truth about conspiracy theories is that some require considering

    For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn