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"Why have credit card firms been withdrawing and modifying credit card accounts?"

By admin | October 9th, 2008 | Featured

Recent reports have questioned why so many credit card firms have been either withdrawing or modifying the credit card accounts of many of its customers, with many people concerned that the real reason behind the changes is all based around how much profit the credit card provider can make. Many credit card firms have come under fire since the start of this year because of various stunts that they have pulled on their customers, leaving customers feel angry, confused, or humiliated. Whilst some credit card companies have tried to justify their actions, others have been unable to offer any explanation, and some officials think that the only reason the action has been taken is because the credit card firms want to make more profit.

It all seemed to start at the beginning of the year, when financial giant Egg decided to withdraw the credit card facilities of over 160,000 customers. Egg tried to make out that the reasons behind the withdrawal of facilities were that the customers were high risk customers that had either missed repayments or were in a situation where they could soon start missing repayments. However, industry officials and consumers were sceptical, as many of those affected had perfect credit histories and had never missed repayments at all.

Since then a number of credit card firms have pulled various tricks on consumers. Some have slashed the credit limit on cards without even informing the consumer, leaving cardholders to find out what had happened only when they tried to make a purchase on the credit card and were unable to do so. Others have hiked up interest rates on the cards by considerable amounts seemingly for no apparent reason. Some have increased charges and fees on cards, or introduced annual fees.

An official from APACS recently said: “A credit card company is a business and it will always be looking to do one of two things: either making sure that it’s lending money responsibly to people who can afford to repay any money that they’re borrowing, and secondly, as a business that needs to make a profit, deciding whether it wants to give you and I a card.”

However, one MP was not convinced. Earlier this year John McFall said: “Are we witnessing a situation where credit card companies are taking cards away from perfectly safe customers who pay their bill in full every month on the same date for years – and giving it to customers who are riskier? And if they are doing so, then their methods have to be called into question.”

One consumer with a well paid job and good credit had his credit limit slashed without notification earlier this year, and he said: ‘I had to endure the humiliation of having it declined twice in B&Q. There was a long queue behind, I was embarrassed, but luckily had other cards with which to pay it. I have had the card for 10 years and, surprise, surprise, I’ve never missed a payment and always paid off the balance at the end of the month. But what really made me angry was that after I asked them why they didn’t give me some notice, they said that if they did that, I could just rush out and spend wildly in an effort to keep my balance up. I found that incredibly insulting.’

Tags: credit card accounts, egg

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