Egg Policy Change ?

thespaceshanty

I am really annoyed at this, I also recieved a letter in the post yesterday stating my account is to be closed in 35 days. I got home really late and this paniced me and I was unable to sleep properly thinking that I would have to wait until the morning to find out if something had happened to my account i.e. fraud because as far as I was aware my credit file with Experian (the company Egg reccommends and uses) said Excelledn 999/1000 saying this they still stunk me on the 16.9% APR!

I called Egg today and was presented by a very unhelpful person who just kept repeating what the letter said. I had a clear balance and recently did a balance transfer, Egg will honour this so are aware that my balance will not be paid off for at least 5 months! Idiots! Hey ho! How pi55ed am I though!!

Not sure what we can do about this, its a huge PR blunder with no prior warning, 161,000 people is one hell of a lot of angry voices!

What can we do about this mess? It's all Citibanks fault of course, they are stuggling so now we all have to pay the price!

oldtup

"What can we do about this mess?"

Email the newspapers and write letters.

It works, if enough people do it!

Start here http://news.bbc.co.uk/1/hi/business/7222336.stm

MoneyMadness_2

To the Journalist:

I’ve worked in the Credit Card Industry for 8 years for several companies. I can state professionally that something is quite wrong in this action of Egg. I don’t mean that they should not have closed these cards, as they have this right. It is the manner in which it has been done.

My partner has an Egg card and I have access to the view of our credit file that every Lending company that we have agreements with has. The variables, such has Experian’s Credit Score and their consumer indebtedness index (CII) as well as our outstanding debts all point to us being very low risk. We have a large mortgage, however this isn’t really a negative thing, as it also points to the fact that we earn well over £100k as a couple if even you make the conservative assumption of the highest multiples of 5 times joint. This makes our indebtedness score at the very low end of low risk. This is hardly the ‘high risk’ information that they are referring to which also caused me great concern and irritation.

They are hardly going to come out and say – ‘you don’t make us money so goodbye’. What most companies do to force close is say something like ‘as you don’t use your card much – we are going to close it….’

However, what is strange with my partners account is that over £55k was spent on the card in the previous year, albeit there was no interest. They would have made over £300 in profit despite no interest in that period. How you may ask?

After taking into account other revenue souces:
interchange income (aka merchant charges) at circa 0.8%: £440
a signifant profit from overseas spend which they make 2.75% approx £2-3k spend p.a.: £83

Their Costs:

Cost of funding (circa 5.5% pa on average daily balance: £120
Overheads: Circa £10 pa
Cashback .01% : £55

I’ve not accounted for bad debt provisioning in this profit calculation. Each company will have a % allocated to each account based on performance. For this type of account, it would be the very lowest (no missed payments etc). It would be no more than 1% of the outstanding balance – so say about £20.

I can tell you that this profit is well above the average for a credit card. What I suspect has happened is that someone has said, let’s get rid of our non-interest payers – select all from database where interest in last 12 months is <= 0 ( or some low amount). And in most cases this would have removed low transactors and those only using a 0% Balance Transfer.

These types of customers make a bank a loss (overheads and funding). However with the BT Fees now standard this loss has been minimised. The fees now cover the cost of funding over the promotional period – making a nil profit – which is far better than a loss and still enough to entice new applicants.

While, this is a simple quick win to change the look of their portfolio, I am surprised that they have been so rash and not segmented further, nor looked at the total relationship a customer has with the bank (other products, other household member’s products). This is the holistic approach that many banks are moving towards so as to not create this mass outrage.

With regards to the reduction of credit limits, this is of no surprise. By reducing credit limits (for example where they are not being used) a bank will save some money by not having to have assets to back up that credit line. I expect this is continue to being an issue with the impending credit crunch.

However, what is clear from this latest exercise from Egg, is that they have created a panic in the public which they should be held accountable for. In fact there is only clear evidence (from these posts) that the credit worthy have been targeted for closure. If the press can investigate further and get an admission from Egg, I will be impressed. I hate nothing more than lies, damn lies.

MoneyMadness_2

It is common practice to lower interest rates for transactors (spenders, but no interest) to try to encourage them to pay interest. (The above account was on 10.9% on an Egg Card). However, this usually results in less profits.

Why if you never pay interest anyway?

Exactly that - because transactors don't need to pay interest - they have enough money & lower interest rates aren't going to change that. AND:
In any one month, there is a 5% chance that a transactor will mess up and pay interest (forgetting, on hols etc). When they do forget, they just pay at 10.9% instead of 16.9%. Most marketing manager don't know how to work this out, so they just think lower the rates and see if they will 'revolve' (pay interest). Inevitably this never works. What they should be doing is encouraging you to put ALL your spend on their card. The more you spend, the more they make in interchange and other revenue streams.

Over the past 10 years, everyone has been given a credit card - or cards! We don't all NEED credit, and now with the credit crunch, banks are going to have to cut back on the credit lines. But right now I'd be more concerned about the mass panic this kind of action will create.

Psiloman

Yes! At long last...SEE THIS STORY:

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3294727.ece

Vindicated!!!

Annabee

I hope my husband doesn't get this letter. We do 98% of our spending on Egg Money (for the cashback), preload it every month and never pay interest. He has a bit of savings with them as well.

Isn't this exactly how you are supposed to use egg money? So therefore how can they justify closing people's accounts ?????

All lies and spin!

KiKi

Is it only the Egg Card that's being withdrawn, and not the Egg Money card?

I have Egg Money, with a limit of £7500, but I pay off in full every month, so I suspect I'm not the sort of customer they want to have.

Psiloman

Annabee see story above

" Credit checking agencies say banks are beginning to weed out customers with faultless borrowing histories because they can make little profit on them"

nearlyrich

I have an Egg CC from my stoozing days with a £9k Credit limit that I haven't used in almost 2 years, I don't really need it and I asked them to move some of the credit limit to my Egg Money a while ago whiuch they were reluctant to do even though I do most of spending on that card, I even offered to close it but the most they would do was move about £2k, total CL with both cards is £14k.

I recently took out the Shell card to get a discount on my diesel as I do lots of business miles and the cashbeck from egg isn't worth as much, I have only relaised today that Citi group who own the Shell card also own Egg.

I am now expecting a letter from Egg after reading this and the other threads on MSE as I have an unused card (Mastercard) and I wouldn't be too surprised if they wanted to can my Money card even though I use it all the time as I don't make any profit for them, although they will get merchant's fees.

I wouldn't mind getting rid of the CC but I would miss the Moneycard as I get a fair bit of cashback with all my expenses from work going on that card.

I rate their customer services as I had a lost card a few weeks ago which they managed to replace the next day, I hope they don't stop my account or I will have to have a look around for a new provider.

Jo77

Got another letter this morning saying my Egg Money card is being withdrawn.

Incidentially, have just checked my Experian credit report & I am classed as 'Excellent' with a score of 999 out of a possible 1000.

Am going to write Egg a stinking email & take my savings elsewhere (but leave £1 in all the accounts as suggested)