Expensive credit

[ewx]

Robert Jenkins had the credit limit on his Lloyds TSB platinum credit card raised from £6,000 to over £11,000 in under two years - on an annual salary of £18,000. His wife Evelyn was lent £4,500 on her Lloyds TSB platinum card on an annual salary of £5,500.

“was lent”? No element of “chose to borrow” at all?

Yes, offering to loan someone more money than they can sensibly afford (assuming that's what we're meant to conclude from the above numbers) is an irresponsible act. But so is accepting the offer. There's two parties to this decision and I don't see why all the blame is being attached to only one of them.

(My credit limit, on the same kind of card, started out at £4,500 and in fact hasn't changed since then; five or six years, I think. So it's clearly possible to have a credit card from the same bank without a ridiculously inflating limit.)

Comments

[hsenag.livejournal.com]

I'm not sure that all the blame is being attached to one party. But reality suggests that targeting the banks to change their behaviour is more likely to be effective.

[ex-lark-asc.livejournal.com]

Unfortunately that means making it illegal for them to take advantage, since they'll do whatever's legal for them to do if it means making money.

not sure that all the blame is being attached to one party

[ewx.livejournal.com]

Perhaps not globally, but I couldn't see any kind of nod towards personal responsibility in the article.

[(Anonymous)]

Exactly my thoughts when reading it - why shouldn't banks allow their customers increased spending limits? The blaming of the finance industry for the stupidity of a small minority that can't handle their finances seems to just encourage the excuse for bad debt that it's not the consumer's fault.
This is a particularly sensationalist non-article for the BBC. Where's the news content - that banks have an obligation to generate profits for their shareholders?

(I think the raising of credit limits depends on the card. My barclaycard and lloyds limits have only risen at my request where as my virgin card was raised by 10% or so.)

[k425.livejournal.com]

Whereas my Lloyds limit was raised regularly without my request, even while I was a student. And they knew I was a student. My credit limit by the time I graduated was larger than my annual student income.

[uisgebeatha.livejournal.com]

Heh. I have a credit card that started out with a £350 credit limit and got upped to £650, but only because I asked for it. They do seem to up it if you pay it off on time as well; it's quite scary. I know I can just about afford to pay bits off this card so there's no way I'd either take another card or up the limit any more- the Scottish nature in me would feel slightly ill if I did. :P

[arnhem.livejournal.com]

You're quite right that it's misleading to omit to mention the greed of people who want what they haven't got and can't afford; but you have to be careful that you don't wander off to the logical conclusion that if people choose to accept the offer of a 1000% apr loan from a bloke who has a reputation for breaking peoples' legs if they don't keep up, that's their own freely made choice - it usually isn't.

I think part of the point is that it's very easy for a bank to stick to the guidelines that suggest they shouldn't offer credit in implausibly inappropriate situations, and quite difficult for people under pressure to apply the necessary sanity checking.

But most importantly - my understanding is that when you look at the detail of these cases, the ever raising credit limit is almost invariably made not so people can make more purchases, but so that they can make minimum payments on their existing loan. And that is pure evil.

[armb.livejournal.com]

If you don't make more purchases, then changing the limit doesn't change the minimum payment. Or do you mean so that people can transfer an existing loan elsewhere onto the card?

[arnhem.livejournal.com]

I'm fairly certain that I've seen suggestions that people use the cash made available to them by an upped limit to make the minimum payments that they'd otherwise not be able to make; and there's also the business of people getting another credit card in order to use it to fund the minimum payments on a previous maxed out one.

[fivemack.livejournal.com]

I note that I have spent something like £45,000 on my Lloyds TSB credit card over the last decade or so (they give you one point per £10 and keep a running total), and have never had the limit raised; indeed, I at one point clicked on the 'raise my limit' button and had their credit-scoring software tell me 'no'.

I believe I have only once held a balance from one month to another, and that that balance was something of the order of ninepence; I suspect this has something to do with their reluctance to raise the limit.

I would say that an ethical credit-card company would *lower* the credit limit as soon as credit wasn't being paid off in full monthly, and make its profit on the merchant charges.

[ex-lark-asc.livejournal.com]

I never agreed to have a credit card as a student despite the fact they were constantly marketed at me, because I knew I'd use it; once I had an income I thought it might be OK, only to find myself up to my ears in debt. And the more I borrowed the more they raised my limit, which was insane; I eventually got sick of the whole thing, learnt the hard way to live inside my means, and put my credit limit down again myself. I do think it's irresponsible to the point of malice for banks to exploit the financially dumb, and I also think credit cards are currently a huge and fairly unregulated arena in which they can cheerfully do that; caveat emptor is always the case, but there is a power balance to be considered as well and in this case the banks have too much freedom to semi-deliberately entrap the unwary, IMO.

[gmh.livejournal.com]

An annoyance with my bank has run along similar lines; they keep increasing my overdraft limit, even though I have informed them that I want to eliminate my overdraft.

On two occasions, I've asked them to lower my limit. One one of those they didn't; on the other, they did so, then raised it again about 3 months later.

As these things go, my actual overdraft usage isn't that great. There's no way in Hell I need (or am going to use) a £5,000 overdraft limit; and given the fact that my fiscal self-discipline has been somewhat hard-won, I dislike the bank assuming that the lure of more spendable money is what I need.

[ewx.livejournal.com]

That's a mindbogglingly high overdraft limit. I assume that that's not a free overdraft?