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Bank acts after customers play system to the full
Egg Money credit card holders are to lose one of their most valuable benefits after the internet-based bank said it is scrapping credit interest.
From 15 May, Egg Money's 150,000 MasterCard customers will no longer get 4% on their credit balances. The company, owned by US bank Citi, is also increasing cash withdrawal charges on Visa cards.
A number of Egg customers have been using their MasterCard as a savings bank. Cardholders were overpaying their credit card bills, by as much as £5,000, to get a 4% return on their credit balance.
At 4%, Egg was paying far more than most savings accounts.
But Egg's latest move risks alienating yet more customers only a couple of months after it raised interest rates for up to 500,000 cardholders by as much as 7%.
The minimum charge for cash machine withdrawals on Egg Visa cards is going up by almost 67% – from £3 to £5 – from 28 May, another deterrent for those customers who want to borrow cash on a credit card.
The transaction fee of 3% remains the same. Most credit cards charge a minimum £2.50 or £3 to take cash from a machine.
Egg Visa and Egg Money both charge 16.9% for borrowing. However, Egg Money cardholders get 1% cashback on all purchases (up to a maximum rebate of £200 per year) which means it remains a good bet for those people who pay off their credit card bill in full each month.
A spokeswoman for Egg defended the removal of credit interest.
She said: "Few Egg Money cardholders keep a meaningful positive balance on their card and most chose the card because of cashback, which they will continue to receive, plus the additional [provision of] insurances."
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