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Have you seen a reduction in your credit card limit?

As the credit card industry comes under more and more pressure to reduce interest rates it would appear that credit card companies are cutting back on their liabilities and their future exposure. A recent survey suggests that 2.7 million customers have seen their credit card limits reduced by an average £2,000 over the last six months. This is a substantial 50% increase from the same period last year and would appear to herald a new era in credit card expenditure.

This is not the first time we have seen a significant reduction in credit card limits with Egg causing outrage last year when overnight they slashed customer credit levels for 161,000 customers even though many of them did not have a single blot on their credit record. There is no doubt that the credit card industry is currently, and is sure to suffer further, defaults from customers but it is becoming something of a self fulfilling prophecy.

Credit card companies are maintaining their relatively high interest charges because of increased default rates and default rates are increasing because of relatively high interest rates. This would appear to be a significant problem for the industry, knowing when to cut rates and when to cut credit limits. Placing pressure on customers to repay their debts "early" can only make the situation worse but what options do they have?

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