Egg Money Rate Increase to 16.9%

BoyMonkey

Risk pricing is an accepted financial norm - you increase the rates of the riskier customers en masse so that the overall profit of those customers pays for the ones that default. However, that should also include a sensible credit limit so by leaving large limits in place they are encouraging people to overstretch whilst making a mercenary level of profit.

CopperPlate_2

Yes, I thought that might be the case. I have no problem with risk pricing, it's just the fact that egg seem to be doing it en-masse - 550,000 increases, compared to 100,000 decreases apparently. I wonder how many of those decreases were from 16.9/12.9 downwards, or whether they were 26.9 to 22.9 or so?

Paul_Herring

BoyMonkey wrote: »

Risk pricing is an accepted financial norm

Indeed, It's just that it is being perceived that it's Egg's own risk that has gone up, and the customers (who's risk hasn't changed) are seeing the increase in interest rates.

BoyMonkey

I don't disagree Paul. I think Egg's attitude towards its customers is absolutely disgusting. Sadly voting with my feet is exactly what they want me to do (and what I have done). I've previously had a personal loan with them that was paid off in full, so I'm not entirely sure why they seem to think I'm so high risk. I've asked for individual details (and threatened them with the ombudsman) although I don't expect to get anywhere.

financial_warrior

Just another bit of information to those who haven't yet been moved up to 16.9% yet:

http://www.shell.co.uk/home/content/gbr/products_services/on_the_road/card_services/shell_credit_card_from_citi/smc/

This is the card I'm sure Egg will try and move everyone over to, once they've got all remaining Egg Money customers up to 16.9% APR or higher.

I don't believe in conspiracies, I believe this is a decision to consolidate a non-profitable product model under the Egg brand into a profitable one under the Citi brand.

withnell

Surely by raising the APRs, if the product is currently unprofitable, it will become profitable?

BoyMonkey

Depends on how many customers swallow the increase. If too many of your customers migrate, you won't be getting the interest to cover your overheads. That said, given that credit is so much more difficult to obtain at the moment, they're banking on people staying.

financial_warrior

withnell wrote: »

Surely by raising the APRs, if the product is currently unprofitable, it will become profitable?

How can it be profitable for a company to run two almost identical competing products on two different systems? It makes complete business sense that once the Egg Money customers are all on 16.9% (the rate must Citi deem profitable), you move them over to the other product and shut-down the other - saving a load on servicing costs.

It is Citi's 10 year objective for it's BRAND to become as major a player in the UK consumer market as they are in many other markets around the world.

chris-j

financial_warrior wrote: »

Just another bit of information to those who haven't yet been moved up to 16.9% yet:

http://www.shell.co.uk/home/content/gbr/products_services/on_the_road/card_services/shell_credit_card_from_citi/smc/

This is the card I'm sure Egg will try and move everyone over to, once they've got all remaining Egg Money customers up to 16.9% APR or higher.

I don't believe in conspiracies, I believe this is a decision to consolidate a non-profitable product model under the Egg brand into a profitable one under the Citi brand.

I would agree here - Egg Money is almost certainly being killed off - Can't understand why they don't just concede this and ask people if they want to switch to Shell Mastercard or cancel account. After all they have reassessed our credit-worthyness already

Paul_Herring

financial_warrior wrote: »

How can it be profitable for a company to run two almost identical competing products on two different systems?

Ask Egg - they've been doing it for years, and have just suddenly decided to stop.