There is an interesting article on the BBC web site on how Internet bank Egg is writing to 7% of their credit card customers to inform them that they are withdrawing their credit cards. Egg believes these customers pose an unacceptably "high risk". However the interactivity of the BBC's web site appears to have revealed the truth on the matter, when customers left comments behind on the BBC's web site.
It appears Egg are ditching customers who pay their debts off in full each month, basically customers Egg isn't making any money off in interest charges. If you think about it, it kind of makes sense credit card companies don't like people who pay any debts off their card each month. These customers don't use their credit card as a credit card they are using it more as a debit card but with the safety a credit card gives you when purchasing goods. If this is the case I will be expecting a letter from Egg pretty soon telling me that they will be withdrawing my card.
What I find interesting is there are people credit card companies are targeting (their ideal customer) who ring up debt and don't pay it off, or only pays off small amounts each month. However there is also a smaller group of more frugally minded people who use credit cards to their advantage and quite legally, who are not profitable to credit card companies. These are people who will:
- Put all of their work expenses on 0% interest free credit cards and when they claim the money back from their work, place it in a high interest savings account. They then pay off the card completely at the end of the 0% interest free period and keep onto the interest they have owned.
- Use credit cards purely to earn air miles and pay off the balance in full each month.
- Use credit cards to earn Nectar points and pay off the balance in full each month.
- Jump from card to card as the 0% interest free period runs out. These people are better known as "rate tarts". Some are incredibly well disciplined in how they switch from card to card and actually make a bit of interest out of the credit they owe in the process.
Its starting to make me wonder if these happy days for the credit savvy consumer are coming to an end as the banks start to feel the crunch?