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UK credit card issuers get tough

Jeremy Simon

In the United Kingdom, credit card issuers have decided to get tough with certain cardholders.

British issuers Egg (owned by U.S.-based Citibank) and Barclaycard have decided they would rather drop certain cardholders altogether than let them hang around and pose a repayment risk — even if the cardholders had nothing in their credit report to suggest they were a danger.

Barclaycard wrote a letter to more than a million of its cardholders letting them know their credit cards were being canceled. The cardholders’ crime? Neglecting to use their Barclaycard credit cards for long periods.

Internet bank Egg (featured on our U.K. sister site) previously had canceled the accounts of 161,000 customers it deemed “risky.” But according to a recently leaked e-mail, those Egg cardholders were actually cut loose for seemingly innocent activities ranging from losing a credit card to using their plastic too often.

The U.K.’s Sunday Times reported on one cardholder whose account was canceled because he lost his card. The paper labeled the act “doubly worrying because credit-reference agencies do not change your score if you report a card as stolen, suggesting banks are turning to sneaky methods to weed out prudent customers.” As for the cardholder who overused her credit card, she had never missed a card payment. Another consumer had her Egg card canceled simply for “higher than normal” cash withdrawals at ATMs.

The Times article quoted credit reporting agency Experian’s James Jones as suggesting more credit card issuers could get tough with consumers even when those cardholders’ behavior has no impact on their credit scores, which are traditionally used to decide whether or not to loan a customer money and at what interest rate.

“Lenders are really tightening up their procedures and anything that classifies you as a greater risk — even if it is something we all do, like losing our card — could count against you,” Jones told the newspaper. “I wouldn’t be surprised if more firms take a tough line.”

Those get-tough tactics extended to other U.K. credit card issuers, as well. The Times said one Goldfish Morgan Stanley customer (who had never missed a payment and was a solid, low-risk borrower) had his credit limit slashed by more than 93 percent within three months.

Back here in the U.S., it seems that banks are already making life harder on credit cardholders, tigthening lending standards, upping rates and lowering credit limits. We have started to hear from cardholders in good standing who were nevertheless penalized by their issuers.

Are you among them? Have your interest rates, credit limits or other card terms suddenly changed even though your payment behavior and card usage have not? Let us know: Comment on this item, or e-mail

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