With letters from Egg falling onto many of its customers doormats revoking their credit cards, we ask what can you do?
If you are one of Egg's 2.3m customers that received a letter from the bank recently, entitled "Your Egg Credit Card Has Been Cancelled", you may have been quite surprised.
High Risk Customers
The internet bank has sent out these letters to around 161k people (approx. 7% of its customers) whom it has deemed "high risk" and the decision means that in 35 days time, their credit cards will cease to work. While payments can still be made to the accounts, the credit cards of those affected will be useless.
"So what?" you may be thinking. After all, we're constantly complaining that lenders dish out ridiculous credit limits to all and sundry, which has contributed to the ongoing "credit crunch" situation. A bank deciding that high risk customers (i.e. those that may have missed payments or exceeded their credit limits in the past) should have their credit withheld has to be a responsible one, right?
Good Credit Histories Affected Too
Well, things are never as clear cut as they seem and there's more to Egg's decision than meets the eye, as high risk individuals are not the only ones that have been targeted. As a number of our readers have explained, many of you with excellent credit histories have, somewhat bafflingly, received one of these letters, too.
So what on earth is going on?
Well, putting my cynical hat on for a moment, it's pretty clear. Although the current climate means banks are trying to offload high risk customers to reduce the potential number of bad debts they have responsibility for, they also, as always are looking at ways to boost profits. And Egg has clearly decided that as some customers with excellent credit histories who always pay off their credit card balance on time don't make them any money, what's the point of keeping them?
What's more, as our resident guru David Kuo has pointed out, the people most likely to have been targeted are aged between 35 and 49 and homeowners. Egg may well be hoping to push them away from unsecured lending such as credit cards, and persuade them to take out secured loans on their homes instead (which is deemed safer from a lender's point of view, but certainly not from a homeowner's).
Indeed, infuriating as this may be for many of Egg's responsible customers, it seems that this may be the tip of the iceberg with other banks watching the response and waiting to follow suit.
So what can you do?
Well, if you're unhappy with Egg's decision the best thing to do, as always is to vote with your feet. And that doesn't mean to head down the secured lending route - if you must borrow money and know you're responsible enough to handle the repayments, cheap personal loans and credit cards offer the best option without risking your home.
And while Egg may have launched its savings accounts with a flurry of excitement back in the nineties its rates are far from market-leading now, so it may be time to also move that cash to a better savings account. As we always say: don't stick with a provider out of misplaced loyalty - it won't be loyal to you!
But on the other hand if you are someone that has failed to keep up with their credit card payments in the past, or exceeded your credit limit, think long and hard about borrowing more, or having a credit card at all. Try and stick to using a debit card instead and keep your spending under control - and avoid getting into debt.
More: Find a better card in our Credit Card Centre | Eleven Cracking Credit Cards
