More than half a million customers will see their borrowing rates raised by as much as 5 per cent.
Egg, the credit-card provider, is raising borrowing rates by as much as 5 per cent for more than half a million existing customers – and telling those who cannot afford the increase to go elsewhere.
It is the second time in a year that Egg has written to customers en masse, after it closed 161,000 accounts last year in an effort to cut back on “risky” lending.
Egg, owned by US banking giant Citigroup, will increase rates for 550,329 customers, by an average of 4.39 per cent, with the highest increase at 5 per cent.
The rise, which will vary in size depending on the customer, takes effect from March 6. Those presumed to be at a greater risk of defaulting on repayments will be charged higher interest. Even “good” borrowers who pay off their balance every month could find they pay more.
Pete Harrison, of Moneysupermarket.com, the financial comparison site, said: “This does not only apply to those who have missed payments on their credit cards. If you have defaulted on any sort of loan, or multiple cards with high credit limits from other providers, it could be flagged up under credit-rating agency data-sharing agreements.”
Egg customers can cancel the card if they do not want to pay the higher rate. Those who cancel will be required to repay the outstanding balance at their existing rate and will not be able to spend on the card.
Writing on the Moneysupermarket forum, one customer, whose interest rate is to rise from 16.9 per cent to 21.9 per cent annually, said: “I have £4,300 owing on the card and am not in a position to clear the outstanding balance in one go. It means another £30 increase in interest each month.”
Another wrote: “The one thing I’m cheesed off with is my rate has been increased to 21.9 per cent … but my husband’s Egg card has only been increased to 17.9 per cent.”
Egg’s decision flies in the face of public statements by Lord Mandelson who, in November, threatened heavy sanctions against card firms acting “unfairly”.
Capital One, one of Britain’s largest card firms, made a similar move last month when it raised rates for some borrowers by as much as 7 per cent, to 26 per cent.
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