It’s time to cut your spending before your bank does it for you

One in eight card holders (12%) in the UK have had their credit limits cut according to latest data from independent personal finance website Fool.co.uk. Their spending limits have been pruned back by about 7%. One in a hundred card users (1%) have even had their cards cancelled.

Customers between 34 and 49 years of age are worst affected. One in six people (17%) in this age group say their credit limits have been reduced. Elsewhere, one in seven people (14%) in their early fifties have seen their spending limits cut.

But there are two sides to the credit card tale, and the flipside is even more disturbing if you think that banks are behaving prudently. That’s because young people between 18 and 25 years of age are three times more likely to have their credit-card limits increased.

Around one in seven people (14%) have been given additional facilities by their credit card providers in recent months. However, one in two, or three times as many cardholders, who are between 18 and 25 years of age have seen their spending limits upped.

In the main, 18- to 25- year-olds say their credit limits have been increased by a fifth (20%). Additionally, two out of five young Brits (41%) reckon their providers have boosted their spending powers by up to 50%.

David Kuo, Head of Personal Finance at Fool.co.uk, says: “It seems that banks are sending out confusing signals to consumers as the credit crunch unfolds.

“On the one hand, they are slashing credit limits to older consumers who have become accustomed to credit. But on the other hand, they are increasing credit limits for younger consumers at a time when we need to practice greater financial discipline.

“As part of Fool.co.uk’s report into Your Finances in 2012, we predicted that secured lending will grow at the expense of unsecured borrowings. And it seems that by reducing available unsecured credit for older customers, banks are leading these customers towards secured loans.

“There are indications that lenders are pulling down the shutters for some customers, and holding the door open wide for others. But consumers must avoid getting their fingers trapped in the credit crunch because what banks give with one hand they can easily take away with the other.”