UK credit card limits on the rise


New research from the Bank of England reveals how credit card limits have begun to rise again. According to the bank's latest Credit Conditions Survey, limits increased in the fourth quarter of 2011, as did the total amount of unsecured credit made available to UK households.

These results highlight the importance of taking the time to shop around and compare credit cards.increased-credit-limit

Competition improving in the credit card market?
In 2010, many people complained that their credit card limits had been cut. Credit card providers were making the cuts in response to the uncertain state of the economy and the recession. Fearful of bad debts, some card companies have been keen to limit the amount that consumers can borrow, even if they have a good credit profile.

However, the new Bank of England survey indicates that providers are now raising limits once more, most likely in an attempt to improve the competitiveness of their cards.  Providers may also be responding to the fact that demand for credit card lending fell slightly in the final quarter of 2011.

In other words, consumers are becoming more cautious about borrowing (hence the decrease in demand for credit). And, with this decrease in demand, lenders are increasing the supply of credit to remain competitive. The Bank of England predicts that demand for credit will fall even further in the first quarter of 2012, due to the economic problems Europe is experiencing.

What to do if your credit card limit is too low
If you feel your credit card limit is too low, you might be able to take advantage of this climate of higher limits. Ask your existing provider if it will increase your limit -- or shop around for a different card.

It is often the case that cards with higher acceptance rates come with lower limits. Meanwhile, cards with higher limits are reserved for those with the best credit histories. So, if you have bad credit, improving your credit score could help you gain access to cards with higher limits.

Making sure your credit profile is correct, registering on the electoral roll at your current address and refraining from applying for too many different financial products at once can all help your score.

See related: Consumers expect inflation to remain high in 2012; Holiday debt promts credit card spending?

Published: 12 January 2012