Saturday, Feb 02, 2008
Credit crunch leaves customers with egg on ther face
Firstrung: Egg credit card stunt an early warning signal of more pain to come
David Kuo, Head of Personal Finance at Fool.co.uk:"We are not surprised that Egg has stopped 161,000 customers from spending more on their credit cards. This is only to be expected as banks review the quality of their customer base as the credit crunch unfolds. "However, the swiftness of its response is likely to catch many consumers on the hop. We therefore urge all card customers, especially those between 34 and 49 years of age, to take special care
Posted by converted lurker @ 10:13 AM (1724 views) Add Comment
16 Comments
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1. stillthinking said...
I remember as a youth, when I finished university after I while I longer qualified for the free overdraft facility. As the overdraft was in existence I was switched to unauthorised overdraft with all the associated charges (NatWest).
I wonder if this will be the same.
2. Montesquieu said...
I've just had my Egg card cancelled. Their 'risk exposure' was £450 (though having said that I've twice recently taken £1,000-ish negative balances due using cash machines on holiday away from the card with 0% balance transfer deals, and was about to do the same with this one).
It's crazy, my total debts are around 12% of my annual income - not high by any means and will be gone by year-end - and I'm renting, so won't be hit by negative equity. I've been an Egg customer for nine years and never missed a payment or gone even close to my (£12,000!) limit.
This suggests to me that Egg's stunt has nothing to do with exposure to risk from customer default, and everything to do with Egg's lack of access to cash. Looks to me like they are in big trouble with their business model and trying to put the blame on their customers! (At least Northern Rock didn't try to get away with that one).
3. renting2 said...
Saw on the news today that one card customer who cleared their debt every month had their card cancelled. The companies are now tightening their criteria for the 'ideal customer', anyone outside of that will be disappointed!!
4. handle_it said...
"Nothing to do with the credit crunch" say Citi. Oh really :o)
5. Cstanhope707 said...
Not to worry Crash Gordon and Co will come to the rescue with another Taxpayer funded Bail Out...
As I said before House Prices will rise between 10 and 12% this year and the BTL and other reckless borrowers will get a Bail Out from the Government..
6. wiltshire said...
Cstanhope, not sure if you're serious with that second sentence but I would say 'expect the unexpected'. With the NR situation and action like this from Egg we are, IMHO, well and truly in unchartered waters - AND this is just the BEGINNING. The rule book is being torn up as we speak and I doubt that any previous scenarios will apply this time. The situation in the USA is weakening almost daily now and in the UK we're going to have to absorb that as well as cope with our own problems. My advice to anyone would be to STR, get rid of your debts, assume the crash position and PRAY that Labour don't sacrifice your savings at the altar of financial incompetence.
7. jack c said...
My daughter was very recently invited to apply for a retail store card and elected to do so because it gave an immediate saving of 20% on the goods to be purchased (her credit rating is as high as it gets) however GE money declined her. They must now be looking for some very niche business if indeed they are looking for any at all !
As Wiltshire rightly points out we are "well and truly in unchartered waters"
8. japanese uncle said...
Recently I have been bombarded by the solicitation for credit card memberships. Funny.
9. pecker said...
The only people being offered CCs are those that dont need/use them...
10. happyrenterz said...
This BBC forum Egg's 'risky' customers answer back makes you wonder what the criteria are for refusal. Citigroup are in very deep trouble generally. This bank is fighting for survival so cannot lend out money.
11. wiltshire said...
Funnily enough, reading the comments added to this story on the BBC site it sounds as though Egg have targeted a lot of very credit worthy (and therefore low profit in Eggs eyes??) customers.
Funny old world isn't it? Even those who are comfortable, presumably prudent and who so far may have felt insulated from the troubles in the financial world are having those troubles brought straight to their doors. Whatever is going to happen next?
12. paul said...
I find it deeply unpalatable that the media has chosen not to state the real cause of this move, a point which I made on the BBC site with a comment that was promptly discarded:
EGG HAS A POOR CREDIT RECORD, NOT EGG'S CONSUMERS.
For a company to say that their customers are no longer creditworthy when the real problem is that THEY have trouble getting credit in the open market is galling. Shame on the media (especially the useless government lapdog BBC) for attempting to portray it otherwise.
13. Last_days_of_disco said...
This is really quite chilling to me.
When I was in Denver in 2000, it was hit heavily by the dot com bubble and I remember QWEST laying off thousands
of employees. Its was a surreal time. Things just disappearing, Mary Celeste offices of companies you worked with the week
before.
And this sort of stuff, your card suddenly stops working (I don't have an Egg one, just a boring old HSBC over the odds effort). Gives you the feeling things are a lot worse than the politicians or the bankers are really letting on, or any of us really understand. The numbers bandied about 2400 Billion dollars (the monoline companies -- whatever they really are, sounds like a bad idea, banks should just be careful), 40 billion losses for some or other bunch of bigwig banks in the City.
It completely boggles my mind, I mean what does 1 billion dollars look like, let alone 2400 of them? Its so big it just flows over me.
I started shopping at LIDL to reduce my food bill (haha I have made my 10 quid saving every week) and all stupid spending is off.
But really, the point I am making is that consumer spending is going to dry up very quickly and lots of "non-essential" businesses are going to the wall.
14. it_is_going_with_a_bang said...
A spokesman for the bank said those affected were customers it no longer wanted to lend to "regardless of their current status".
That is closer to the truth.
I would imagine they are closing the accounts of people they think will use the card hence avoid having to lend money they have not got.
Quite frankly MBNA did much the same to me recently for no good reason and I couldn't care less - it's a credit card hor heavens sake!
15. Orwell said...
It is all about internet banking! Egg were the first to say they were thinking of abolishing the free 6 months rate tart rate. They probably HAVE had their credit chanels stopped then. This is very interesting. Soone from the Shitty group has been looking at risk and profit and both don't add up.
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