Credit Cards hit new Limits

For consumers facing difficulties due to cuts in credit limits by many credit card companies, there are a range of solutions still obtainable.

Several credit card companies are reducing credit limits in order to diminish their risks during the credit crunch. According to published figures, 2.7 million consumers have had their credit card limits cut by an average of £2000 during the past six months.

When there is a recession more people default on their credit card payments, therefore credit card companies are now seeking to limit their exposure by reducing the amount owed to them. This measure is applied to people regardless of whether they have a poor payment record. However, for those with a bad credit history, this is yet another blow.

If you have reached your credit card limit, and are having difficulty getting another credit card because of a bad payment history, don't worry, alternatives are available. There are companies who will still offer credit cards to people with a poor credit history, for example, the Capital One card, or the Vanquis Bank Visa card, both of which set you a low credit limit to start with, but increase it after you have demonstrated that you can regularly meet minimum payments. With the Vanquis card your credit limit will be set according to your individual circumstances, rather than according to a blanket policy. You will also qualify for an interest free period of up to 56 days if you pay two or more statements on time and in full. Although interest rates are high, there is no annual fee payable on this credit card.

Another solution is to take out a prepaid card. There are several of these on the market including the Optimum card, the BREAD card and the APS CashPlus card. These work in a different way to a credit card as you need to have loaded sufficient cash onto the card in order to make purchases. However, they are similar in appearance to debit and credit cards and you can use them online and anywhere in the world where Mastercards or Maestro cards are accepted. They also have a number of advantages in that: you don't need a credit check in order to obtain one, just proof of ID and a postal address; they enable you to have better control of your finances; there are no interest fees payable, only management fees, issue fees or usage fees.

Fees vary from card to card but the prepaid card companies publish details of applicable fees on their websites, enabling you to find out beforehand how much you can expect to pay.