Egg froze account balance but increased interest rate, is this legal?

SXGuy

I wonder if anyone could answer my question.

My mother, has a credit card with Egg, she has always made payments on time, never defaulted on it, or anything in her life.

As most of you know a little while ago, egg decided to freeze the balances on a lot of their customers credit cards.

However, she mentioned to me today, that they have also increased the interest on her balance, even tho she can not use the credit card.

Is it legal for them to be able to freeze the use of the credit card but still increase the interest on repayments even though she has never defaulted?

Thanks for any help you may have.

normanmark

Yep, its called a variable credit agreement. Which means the interest can change at the discretion of the card company. They can also freeze the balance as & when they sit fit, its their money after all.

SXGuy

hmm, i guess it did sound like something cheeky they would do, but i wasnt sure.

Thanks for clearing that up.

Its quite ironic but you would think what with the current economic crisis, they would actually lower the rates again to help people actually afford to repay their debts.

Its not hard to start believing theres another hidden motive to all this.

Maybe another hopeful bail out from to much written off debt due to failed repayments? lol

normanmark

With the current economic crisis it means they're affected just as much as people. But ultimately, they're a business not a charity.

SXGuy

Yes i know, however any good business adviser would say, that to ensure the continuation of a business you must maintain your client base.

I guess their profits outweigh any decsions to help the consumer, at least not for a very long time.

EDIT: and on a side note, since the ibor(or whatever its termed as) is the main reason for banks not passing on rate cuts, i dont understand why they dont see it in their best interests to help the consumer in enabling them to repay their own debt.

If interbanking is so big, surely they are all cutting their nose to spite their face.

Am i missing something? like a regulating body that governs the ibor rate?

normanmark

As one Barclaycard man said the other week about the interest rate cuts...

The primary factor in our pricing is risk, not the cost of money, so the cut will not have an immediate effect.

The rate cuts will effect mortgages & savings primarily. Libor rates won't come into it at all, so lose the association. Credit card companies see customers with balances as business to be made of, so they'll up the APR.

I think you're being severely naive to assume that credit card companies are here to 'help the consumer'. They're not. They're a business & they will continue to do so. The way to beat it is to play them at their own game, pay your card off & in full every month. That way they cannot make any money from you.

SXGuy

I probably am being naive however, i do have to disagree with you to a point.

Its very likely given the situation right now that if i paid my credit cards off in full each month, they would probably freeze it, or increase my rate or even cancel the card.

I do know of one instance where my partner remortgaged 18 months ago to pay off a few credit cards with big balances, and shortly after, one of the lenders replied with a letter saying they are freezing the account.

Shes never had bad debt in her life.

Id rather pay them something as little as possible just to be a little bit more convinced they wouldnt do the same to me if they wasnt making any money from me.

I think in a world of no credit, its advisible to at least try and hold onto some.

normanmark

SXGuy wrote: »

Its very likely given the situation right now that if i paid my credit cards off in full each month, they would probably freeze it, or increase my rate or even cancel the card.

The rate increase wouldn't matter to you as you pay it off, every month, in full. If you pay it off in full then you'd have no problems in getting credit, you just have a higher APR & you just ensure its paid off every month.

People need to start taking control of the situations & stop leaving themselves at the mercy of credit card companies. Rather than waiting on CC Companies to become charitable