Egg, an online bank has banned 160,000 debt-ridden customers from using their cards. The move will affect 7% of its 2 million credit card customers who have higher than acceptable risk profile – they are spending over their credit limits or failing to make even minimum repayments every month.
HSBC is turning away half of its credit card applicants as compared to one-third which they used to turn away.
Barclaycard is blocking some customers’ ability to withdraw cash on their credit card as it is a classic sign of financial distress.
Others are slashing 20% of their customers’ credit card limit since August and clamping down on credit card customers who they fear are spending money they will never repay.
These may be the jolt needed for some of the credit card users as they are a growing number of people relying on credit to manage their day-to-day living.
I believe such moves are necessary to curb the alarming increase in credit card debt worldwide. Rather than dishing out credit cards to the applicants, banks should take a more pro-active move to help customers to control their card spending such as:
- a limit on how many cards a person owned,
- stricter acceptance rules such as higher income requirement
- lower credit card limits
- higher minimum payment (may be 15-30% as compared to 5% now)
- lower interest rates.
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