The Rate Tart

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TheRateTart has always had a soft spot for the good old Egg credit card.

That's because way back when Egg were the pioneers of the 0% Balance Transfer Credit Card. Others soon followed and before long a new species was born...The Rate Tart.

But in a surprise move, Citibank (the new owners of Egg), have announced a massive 161,000 customers are having their credit cards cancelled due to deteriorating credit profiles.

But angry victims of the credit card cull have hit out. They claim that far from embracing socially responsible banking, Egg is in fact using the credit crunch as a convenient excuse to ditch unprofitable customers. The aggrieved customers have claimed they have good credit histories and /or always pay off their balances in full each month.

Whilst it's impossible to tell who is telling the truth, or whether these are merely isolated example credit card providers ditching accounts that are not in debt is not as crazy as it may seem.

Every customer costs the credit card provider money to service. Whether it is providing monthly statements, staffing call centres, maintaining internet sites, you pesky customers are a constant drain on profits.

But the only customers who make the banks money are the ones who are in debt, and preferably in debt for a long time. In fact, the dream customer is one who pays off the minimum amount every month, taking years and years to clear their debt and racking up hefty profits from interest payments.

If you were to go through every one of the 161,000 cancelled cards you'd probably find lots of customers who have deteriorating credit ratings and lots who pay off their bill every month.

But if you are looking for the one thing that ties them all together, you will find it is a lack of profitability, not social conscience driving the decisions every time.