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FEATURE: Thousands hit by credit card withdrawal

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In light of Egg’s decision to cancel the accounts of thousands of its credit card holders, Barney McCarthy looks at the reasons behind the move

‘Egg’ is in the papers for more than one reason this week. While yesterday saw thousands of the yolked variety cracked into saucepans to mark Pancake Day, Citigroup’s online banking subsidiary hit the headlines over the weekend for terminating the accounts of thousands of credit card holders. Egg wrote to 160,000 customers last week to tell them their credit cards would be withdrawn and that they had just over a month to stop using them. However, cardholders would be required to continue with monthly payments to clear balances.

Parent company Citigroup said it had taken the decision after an extensive credit review and had targeted customers with a higher than acceptable risk profile, that is, those that have defaulted or gone over their credit limits in the past. But a number of customers have complained that they have not ever exceeded agreed credit limits or missed payments. Egg maintains that only those whose credit standing has deteriorated since they took out the card have been affected.

Rating fears

The move has caused concern among Egg customers that their credit reports could be affected, but credit rating agencies have sought to reassure anxious borrowers. James Jones, consumer education manager for credit reference agency Experian, says: “Your credit report  simply shows what credit you have and how you are repaying it. Egg is not changing the terms and conditions, just withdrawing people’s ability to use credit cards for new transactions. If you have no balance on your card, then that account will be closed, which will have a positive impact on your credit report as they are effectively forcing you to repay one of your debts.”

Price comparison sites have also been quick to respond to Egg’s decision. Steve Willey, head of credit cards at, says Citigroup should be applauded if it was simply stopping further credit card spending by riskier customers. “However, the customer feedback we have been receiving suggests many people who pay their balance in full every month have been targeted,” he says. “If Citigroup is using this Egg crackdown as an excuse to get rid of less profitable customers, then that is very disappointing. The move has been badly handled and now many cardholders who received the letter are talking of withdrawing their savings from Egg.”

The wider picture

Rachel Roe, spokesperson for Egg, says the review was conducted by Citigroup after it assumed control of Egg in May 2007 and has taken until now because of the sheer number of accounts – two million – to evaluate. Roe also says it is perfectly plausible that customers who are not currently defaulting or have never missed a payment on their Egg card could still have received a letter. “Every bank has its own scoring system and Egg’s takes into consideration a number of things,” she says. “As well as your behaviour with your Egg card, it also shows the customer’s pattern of borrowing and propensity to debt. It is not just internal data and does take on board borrowing on other cards.” Experian’s Jones says this is standard procedure and may serve as a good opportunity to find a new card that could offer a better deal.

No other credit card companies have given any sign that they intend to follow Egg’s lead as yet, although general industry speculation suggests otherwise. So, this would appear to be Citigroup simply bringing Egg’s portfolio in line with its own lending criteria. However, given that the credit crunch is prompting lenders to tighten their criteria in other areas such as mortgage loan-to-values, it could well be a case of watching this space. 



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