Egg Credit Card News

One of the forerunners in the field of internet banking, Egg is best known for its credit card services. The Egg Credit Card introduced the balance transfer concept in the UK credit card market in 2000 and a few years later, implemented the concept of balance transfer fee. It also provides loans, mortgages, insurance and investment products. However, in the last few it has witnessed a significant downslide in business after a catastrophic investment in the French markets.

From the very beginning of the year, Egg plc has been in news for its proposed sale to Citigroup. The agreed price (£575 million) is significantly low from the £1.5 billion that was reportedly offered by the Royal Bank of Scotland three years ago. Prudential, the owners had paid £900 to buy out the minority share holders just a year ago, to bring Egg under the folds of the larger Prudential business. However the problems were more serious than expected. In fact, Egg sustained a loss of £145 instead of the predicted £80. Egg put the blame on defaulting credit card holders for this loss. Moreover an increase of interest rates to 5.25% has made matters worse.

To add to its embarrassment, within a space of three months, Citigroup has dropped the prices from £575 million to £546 million. The sales price had depended on the performance of the bank in the first quarter of the year. After the sale, Citigroup will have more than 4 million customers. According to Ian Kerr, appointed by Citigroup to run the Egg, “The combination of Egg and Citi will be a powerful proposition.”

Even after the acquisition has been successfully completed, Egg is still on news, especially due to its Credit Card interest hike. Thousands of Egg Credit Card customers will have to pay now higher rates. With a mere one week notice, some customer may find themselves charged with 21.90% interest instead of 16.90% interest. Although the new owners argue that the new rates are required to gauge the creditworthiness of the customers but reports reveal that customers who had never missed their payments or made late payments are facing these price hikes. In fact some reports suggest that customers who have never used their Egg Cards nor have balance on it are being asked for extra payments. Citigroup argues that some customers have been gainers as they have their interest rates lowered to as less as 10.90%. However, no statistical data were provided to support this.