Associate Article

06 September 2008 07:06 BST

What really happened with Egg?

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There was a considerable amount of uproar at the end of January as Egg announced that it would be cutting accounts of 161,000 customers because they presented an ‘unacceptably high level of risk.’ Unsurprisingly, this wasn’t the whole story, and disgruntled Egg customers who had excellent credit ratings and flawless repayment histories notified the BBC. One customer, Mary from Edinburgh, who was informed that her credit would be stopped, said, ‘I have had an Egg card for almost 8 years and have never missed a repayment... I think this is disgraceful behaviour on their part.’

On the one hand, Egg was saying that the cuts were about risk, but on the other, customers were informing the press that it had nothing to do with risk, more that they were being cut off because they didn’t make the bank any profits. The move also suggested the wariness of banks, such as Egg, to continue to lend to risky customers after the Credit Crunch. However, this was said to be a coincidence according to the bank, who said that the assessment of its customer’s credit was a one off occurrence after the bank had been acquired by the Citigroup last year.

The whole episode was then followed by John McFall, a senior MP and chairman of the treasury select committee, saying that companies may be taking credit cards from reliable customers and giving them to riskier ones in order to boost their profits.

Meanwhile, the website Moneysavingexpert.com decided to find out more by setting up a poll. At the time of writing this article, the poll had 382 respondents, and 161 of them (42 per cent) said of their card: ‘I have larger debts on it, but always pay at least the minimum repayment.’ The second more popular answer, with 69 respondents agreeing (18 per cent), was: ‘I have smaller debts (sub £1,500) on it, but always pay at least the minimum repayment. It turned out that those who had been late with repayments were in a clear minority, at only 9 per cent, which suggests it wasn’t all about risk.

The poll on its own doesn’t provide us with any solid answers. It’s not altogether clear how many of the customers with ‘large debts’ were making good use of Eggs 0 per cent on balance transfers for fifteen months, or its 0 per cent on purchases for three months, but it could be construed that people who have large debts on the card could carry, ‘an unacceptably high level of risk.’

In Egg’s defence, they do not actually have to provide credit to anyone if they don’t want to, and those ‘good’ customers who keep up repayments and avoid interest charges are not actually ‘good’ customers for the bank. From a business point of view, it may well be necessary for Egg to cancel the cards of customers who do not make the bank enough money. Whatever the conclusions of this case, the last couple of weeks have been a PR battering for Egg.

If you’re looking for a new credit card, check out ASDA Finance or The Co-operative. The 0% credit cards ASDA offer are useful if you shop in their supermarket because they provide you with extra in store benefits. Co-op credit cards have a six month 0% interest introductory offer then a competitive rate thereafter. End of story

Associate Article

What really happened with Egg?

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