Disturbing Credit Card Development in the United Kingdom
The United Kingdom is experiencing a credit and mortgage crisis that is similar to the United States. They have the same debt and credit card problems as well.
Last week, an Internet bank based out of the UK, Egg, sent out a letter to 161,000 credit card customers saying that it was closing their credit card account due to high risk. However, many of those customers affected say that they have excellent credit and pay off their balance each month.
If this indicates a philosophy shift for credit card issuers, the same thing could happen in the future in the United States.
"It seems that Egg is getting rid of people that it does not make much money off of, the consumers who pay off their bills each month. Analysts and reporters are questioning this move and raising the possibility that other issuers may do the same thing," says Bill Hardekopf, CEO of LowCards.com. "It may never happen again, or may not happen in the United States, but it is something we have to be aware of because Egg was purchased by the American bank Citigroup last year. This may be a test for
them and could be used with other cards or perhaps in other markets.
"The credit card industry is a business and these companies are always trying to increase their revenue. Issuers are facing problems and losing money with growing defaults from their high-risk customers. From a numbers and revenue standpoint, it might be hard to justify making free loans to people who pay the full balance on time every month. Add in rewards, and this group costs the issuers money. It would not be surprising to see more issuers make adjustments to find ways to make a little money, or possibly charge a slight fee, on consumers who have excellent credit," says Hardekopf.
Last week, an Internet bank based out of the UK, Egg, sent out a letter to 161,000 credit card customers saying that it was closing their credit card account due to high risk. However, many of those customers affected say that they have excellent credit and pay off their balance each month.
If this indicates a philosophy shift for credit card issuers, the same thing could happen in the future in the United States.
"It seems that Egg is getting rid of people that it does not make much money off of, the consumers who pay off their bills each month. Analysts and reporters are questioning this move and raising the possibility that other issuers may do the same thing," says Bill Hardekopf, CEO of LowCards.com. "It may never happen again, or may not happen in the United States, but it is something we have to be aware of because Egg was purchased by the American bank Citigroup last year. This may be a test for
them and could be used with other cards or perhaps in other markets.
"The credit card industry is a business and these companies are always trying to increase their revenue. Issuers are facing problems and losing money with growing defaults from their high-risk customers. From a numbers and revenue standpoint, it might be hard to justify making free loans to people who pay the full balance on time every month. Add in rewards, and this group costs the issuers money. It would not be surprising to see more issuers make adjustments to find ways to make a little money, or possibly charge a slight fee, on consumers who have excellent credit," says Hardekopf.
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