Good payers may be victims of credit card provider cutbacks
As most consumers have now realised financial providers in all sectors, such as mortgages, loans, and credit cards, are all making cutbacks and tightening their lending criteria as a result of the global credit crunch coupled with lenders’ fears over bad debt levels. Those with poor credit may experience real difficulties in getting credit these days, with many either having to pay extortionate rates of interest and other finding it impossible to get the finance that they need.
However, over the last couple of months speculation and concern have arisen over whether credit card companies are cancelling the cards of the right people. Earlier this year Internet financial giant Egg withdrew the credit card facilities of 161,000 customers. The lender said that the reason behind the withdrawal of facilities was that the customers were high credit risks. However, it later emerged that many of those affected were good payers who had never missed a repayment.
This resulted in much speculation over whether credit card companies are cancelling credit cards for the right reasons. According to some industry officials many credit card companies may be changing the terms of or withdrawing credit facilities of those that are good payers, simply because they do not make enough profit from the various fees, charges, and interest payments applied to credit card accounts.
The chairman of the Treasury Select Committee, John McFall, recently stated: “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.”
