[VexatiousLitigant]

This article is almost a month old, but it grabbed my attention recently. It's actually a story about a UK credit card company, but the company is owned by Citigroup. Could be a test for how they want to operate in the US soon.


link

CREDIT card customers who pay off their balance each month are as much risk from being cut off by their lender as those that have lost control of their spiralling debts..

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

It comes as credit card company Egg was accused of withdrawing cards from some of its most responsible customers as part of a cull of those said to have a "higher than acceptable risk profile".

The lender, part of US investment bank Citigroup, wrote to 161,000 customers - 7% of its total base - last week to warn them their cards would be withdrawn in 35 days. They can still repay balances over time.

Many Egg customers who caught up in the clamp down claim they are "risk free" customers who have never breached their credit limit and who pay off their balance each month. Gillian Cox, an Egg customer from Farnham, Surrey, said she was "absolutely furious" to learn that her credit card had been cancelled in what she described as an "unbelievable arbitrary action".

She said she her husband were retired with no mortgage and no debts and "always paid the balance off in full each month". Trevor Smith, from Nottingham, who also pays of his balance each month has also had his card cancelled. "It's disgusting that they are making out its just the bad ones who are being dropped," Smith said. "Fair enough if that's what they want to do, but don't send a really upsetting letter that makes it sound like we have a bad credit history all of a sudden. Good riddance... if that's how they treat people."

One industry insider said that as businesses credit card providers had a right to ditch customers who do not generate income. "In the last two years more and more customers have been paying off their credit card debt and that means less interest charges and other fees for the provider," the source said. "Maintaining a customers account costs money - it's hardly surprising that they want to lose some of those people."

MBNA, the credit card giant, recently introduced annual charges for those customers who very rarely use their accounts.

Egg denied it was targeting unprofitable customers, saying the cull spun from a review instigated by Citi when it bought the internet bank from the Prudential last May.

It said customers were chosen if their credit profile had deteriorated since they had joined Egg, and was mainly based on their relationship with Egg rather than taking into account if they had fallen behind with payments to other lenders or utilities.

"This is not a decision we have taken lightly," said Egg spokeswoman, Rachel Roe. "We have looked carefully at it so that we wouldn't put innocents onto a black list."

However, credit checker Experian said better customers may be less welcome in future as banks chase profitable business to offset losses from delinquent borrowers with rising bad debts.

"Put yourself in their shoes. You spend very little and pay it off every month. You are not an ideal customer for them," said Peter Brooker, a spokesman for the company.

[Hedwig]

I know that at least some companies were going to charge fees to those who didn't carry balances about five years ago. I don't know if it ever happened or not. There was some backlash against it, so they may have changed their ways.

I mostly have rewards cards that have some sort of annual fee, so it hasn't affected me yet.

[hannah]

BoA is already doing that here in the US. Link to the story.

[VexatiousLitigant]

Originally Posted by Hedwig

I know that at least some companies were going to charge fees to those who didn't carry balances about five years ago. I don't know if it ever happened or not. There was some backlash against it, so they may have changed their ways.

I mostly have rewards cards that have some sort of annual fee, so it hasn't affected me yet.

We get about $300 in cash back from Citi every 10 months or so. As long as the annual fee is less than what we're getting in cash back, it's not so horrible.

[Hedwig]

I feel the same way about mine. I have several airline cards. Back when I traveled a lot for business, I accrued over 100K miles on three different airlines.

I probably won't use most of them until I retire and my husband and I spend some serious time traveling. In the meantime, it's worth paying a fee to protect those miles (make sure there's activity on the account at least every 18 months or lose miles) and accrue more miles.

I think it's worth what I pay in fees to get the miles and keep the miles I have.

[hannah]

Originally Posted by Hedwig

I feel the same way about mine. I have several airline cards. Back when I traveled a lot for business, I accrued over 100K miles on three different airlines.

I probably won't use most of them until I retire and my husband and I spend some serious time traveling. In the meantime, it's worth paying a fee to protect those miles (make sure there's activity on the account at least every 18 months or lose miles) and accrue more miles.

I think it's worth what I pay in fees to get the miles and keep the miles I have.

Don't forget to make sure that there is activity on the accounts or they could be closed. My DD who is a CPA called the other day and asked me if cc accounts could be closed for inactivity. I told her yes, I'd heard of that being done and she said she had just had a card closed that she hadn't used in a year or so but had paid the annual fee for so she wouldn't lose her miles. She said the letter she received said she no longer had her miles from this card. She had not received any warning from that this was imminent and was ticked that she was losing the miles AND had already paid her annual fee for the card.

[jlynn]

She needs to call and ask for reconsideration.

[hannah]

Originally Posted by jlynn

She needs to call and ask for reconsideration.

She tried that. No go but they wanted to give her another rewards card that she couldn't get miles from. She is ticked.

[Hedwig]

I use them regularly. You have to use them to get miles, which is what gives you the activity on the mileage acccounts.

Each one is used at least every other month. Most are used every month.

I'm trying to get some sort of automatic payment set up on each one.