Cuts in credit limits follow credit crunch
Borrowing limits on credit cards are being cut following the global financial crisis. Even customers with good repayment records are finding that card companies are lowering their credit limits. Credit card provider Goldfish said that it had cut limits for a “small amount” of customers.
The global financial crisis began with the collapse of the US sub-prime mortgage as many sub-prime customers defaulted on their mortgage payments. In turn, it materialised that many financial institutions had purchased these sub-prime debts on the money markets and were facing huge losses with the sector’s collapse.
This led to an increase in the Interbank rate, the rate at which banks lend to one another. The situation has been called a “credit crunch” and has now trickled down to High Street level. More credit problems are anticipated as big losses are predicted for global financial institutions exposed to the US sub-prime market.