Opinion: all lenders should offer the option to decrease credit limits online

Lloyds Bank wouldn’t let me lower my credit limit online but was happy for me to increase it. And it’s not the only firm guilty of this tactic, which could land people deeper in debt.

When Lloyds Bank gave me an automatic increase to the spending limit on my credit card I decided I didn’t need it and wasn’t going to keep it.

I assumed that, like so many other things, I could manage my credit limit by logging into my online account and simply asking for it to be lowered.

After all, I hadn’t spent anywhere near the amount Lloyds had hiked the limit to, so theoretically it should be a very simple process.

I was wrong.

Sneaky tactics

Weirdly, on the Manage Credit Limit section of Lloyds online banking it stated I would need to call up in order to decrease my limit.

Normally I wouldn’t have a problem with this. I can appreciate that some banks just don’t have the technology in place.

But what really annoyed me is that Lloyds had an option to increase my limit further.

This is a much more complicated process involving a credit check and other questions being answered about income and spending habits.

The fact that it had one option and not the other seems to me like a sneaky trick to make it harder for people to control spending and designed to encourage them into debt.

What Lloyds says

I got in touch with Lloyds Bank and asked about why it had no option to lower credit card limits online.

A spokesperson said: “Customers wishing to decrease their credit limit are advised to contact us via telephone whereupon their request will be processed.

“We are currently building the capability for such requests to be made online and will offer such a service later this year.”

What about other credit card providers?

I wondered how many other providers made it difficult for people to manage their credit card limit online so contacted some of the major names and asked what their policy was.

Barclaycard, HSBC, NatWest, RBS and Nationwide all said they offer an option to both increase and decrease limits online.

Santander said it only offered a telephone service to either increase or decrease credit card limits. It did not allow credit limits to be changed online.

MBNA, however, had the same system as Lloyds Bank. It said customers could request a credit limit increase via their Online Card Services account but they’re unable to request a decrease or consolidation. Instead, these requests would need to go through to their contact centre.

We asked MBNA to explain why it used this process.

A spokesperson said: "Decreasing a customer’s credit limit can potentially have a detrimental impact on the customer’s credit profile for a period of time.  So we like to talk our customers through this prior to reducing their credit limit so they are aware of this potential impact this could have.  MBNA believes in respecting customers and keeping them informed about all aspects of their account with MBNA."

Again this seems like a sneaky tactic to keep people on large limits. There's nothing to stop MBNA putting a warning about this online next to the option to decrease a limit.

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What the FCA says

I also contacted the Financial Conduct Authority (FCA) to find out what the rules around credit limit management are.

A spokesperson told me the issue is something it is planning to look into as the findings from its investigation into the credit market showed that while competition works well there are concerns about what firms are doing to help customers avoid debt.

One of the solutions the FCA says it will be considering is stricter rules on firms to ‘give consumers more control over their credit limits.’

The report stated: “In principle we believe consumers should have greater control over increases to their credit limits to help counter behavioural biases that lead to greater spending when it might not be affordable.

“We are considering a range of options, including a general rule on opt-ins or rules aimed at addressing risk to customers in particular circumstances.”

Stop being sneaky!

Like many others I enjoy the simplicity of managing my finances online. I check my balance, monitor my spending, keep track of rewards and make payments every month.

So I find it hard to understand that it’s easier to increase my limit than it is to bring it down to something more manageable, and I really don’t think it requires talking to someone about it over the phone.

Personally, I think providers should be forced to offer the option to lower a limit online, especially if there is already an option to increase it and it seems like the regulator agrees.

Thankfully with Lloyds Bank this option is on the way, however MBNA were not able to tell me if they had the same plan.

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What do you think? Should banks be forced to allow customers to lower their credit limit online? Let us know your thoughts in the comments section below.

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