Egg to withdraw credit cards from 161,000 customers
Egg is to withdraw credit cards from 161,000 customers who have missed a payment or exceeded their credit limit over the past year.
The company, which was bought by Citigroup in May 2007, is writing to 7% of its 2.3 million customers to inform them they have 35 days before their credit cards will be blocked.
After this time, they will no longer be able to make new purchases using their cards. However, the interest rate will remain unchanged and customers will still have to make monthly repayments until their balance is cleared.
Egg says blacklisted customers have “higher than acceptable risk profiles”. A spokesman for the company admits that those who have missed just one payment over the past year could be affected – even if they have made every payment before and since.
He adds: “The decision to end these customer agreements was taken after conducting a one-off, extensive risk review of our book, following the acquisition of Egg by Citigroup in May 2007."
Egg says it will continue to withdraw cards from customers who miss repayments on an ad hoc basis.
The move has caused outrage among Egg customers, many of whom argue that they have never missed a repayment and are being penalised for being unprofitable customers. Egg denies this is true.
Steve Willey, head of credit cards at moneysupermarket.com, says: "If Citigroup was simply stopping further credit card spending by riskier Egg customers, then it should be applauded.
"But the customer feedback we have been receiving suggests many people who pay their balance in full every month have been targeted. If Citigroup is using this Egg crackdown as an excuse to get rid of less profitable customers, then that is very disappointing.
"This move by Citigroup has been badly handled and now many cardholders who received the letter are talking of withdrawing their savings from Egg. And with Egg accounts paying 1% less than the market leading savings products, this should be of much concern to Citigroup."
Labour MP Nigel Griffiths has also criticised the decision as "unacceptable". He has asked the Financial Services Authority to investigate the matter. However, because Egg has a clause in its terms and conditions stating that it reserves the right to withdraw cards from customers it is unclear whether any further action can be taken.
In the past, Egg has posted a financial loss as a result of high arrear levels in its credit card business.
What can Egg customers do?
If you've had your Egg credit card withdrawn then you do have the opportunity to appeal. Egg says customers should contact its customer services department to ask for their case to be reviewed. However, there are no guarantees that it will reverse its decision.
The move by Egg will not impact your credit rating - in fact, it might actually improve it as once you have paid off the card you will be seen as a better bet for other companies. If you need a new credit card, you can check out the best buys on the market here.
Egg says customers who have had their cards withdrawn can reapply for a new Egg card - however they must wait 12 months to do so.
Have you had your Egg credit card withdrawn? Share your views in the Moneywise forums.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.