Saturday, 2 February 2008

Egg and credit cards

There's a story out about Egg telling over 160,000 of its credit card customers - apparently about 7% of the total - that they will no longer be able to use their Egg credit cards. Egg, which is now owned by Citigroup, has said that this group of customers has become too high risk as their credit profile has deteriorated. This implies that they might miss payments. As such it seems like a fairly sensible strategy from Egg's point of view, although it will clearly irritate those affected.

The story on the Beeb about this is interesting because they quote one Egg customer who has been told to sling her hook who says she always pays the card balance of in full each month. And if you scroll down to the comments at the bottom of the Beeb story there are a number of other Egg customers making exactly the same point. Some of them have checked out their credt rating and found it to be high. Some of the comment posters suggest that Egg wants rid of them because they pay their balances off and thus aren't a very profitable group. But this seems unlikely as the language used by Egg is very clear. So what is going on?

Possibly, given the high numbers of customers being told to get lost, it is an admin error, and a few customers with good credit ratings have been wrongly identified. Probably more likely some of them are viewed as high-risk for different reasons. Off the top of my head retired people might be seen by Egg - or its Citigroup owners - as more risky because they little scope to increase their income if they did run into problems and, thinking bleakly, limited time to make repayments.

Citigroup itself has been stung by subprime exposure and so it is probably looking to batton down the hatches in case things get really nasty. It looks like another gloomy sign of the year ahead.

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