UK banks are blocking customers' credit cards. Will the USA be next?
It was bound to happen. I just thought it would happen over here first. Today BECKY BARROW and JAMES CONEY of The Daily Mail broke the story that banking giant Egg, a household name in Britain, will block over 160,000 customers from using their credit cards. Is this a sign of things to come?
It's no secret that we've become a spend now, pay later society. It's a practice that is not only made very easy, but very much encouraged on a daily basis by banks and retailers. How many times have you seen or heard ads that say "no interest, no payments, until 2009!" That's great for some people; People who have the willpower to make the monthly payments and get rid of the debt. But most people just stick it on the old store card or credit card and forget about it. Until the bills come rolling in years down the road and a debt they had forgotten to account for suddenly turns the budget upside-down.
Hey, but never fear. There's always another credit card company around the corner. Just get another card and hey presto, you're back in business with more spending power, right? Well, maybe not. Egg, a banking giant in the UK, has decided to save the worst customers (around 7% of its 2 million customers) from themselves by blocking the cards and allowing no more spending. They get a letter informing them that in 35 days, their credit card will no longer work. Simple as that.
Other banks are expected to follow suit as the economy continues to tank and more people are making late payments, or no payments at all. What's more, getting a credit card is getting a whole lot more difficult in my homeland. Banks and credit card companies are turning away roughly half of all applicants. The acceptance rate, until very recently, was around 2 out of 3.
Barclaycard, a once reliable source of cash from Barclay's Bank, is preventing some customers from using their credit card to withdraw cash. And one in five credit card holders are having their spending limits slashed.
Is this right? Do we really need to be procted from ourselves, or is this a basic violation of our consumer rights? As a consumer advocate you think I'd be torn, but I think the general public have been spending without prejudice for way too long and the results are showing. Maybe we really do need a big brother figure to watch over us when things get this out of hand.
Several other banks in the UK are soon expected to follow suit, and I'm sure the US banks are watching very closely. Tired of getting burned by non-payers, bankruptcies and credit-card shufflers, the US banks could soon be striking back at consumers who are consuming way more than they can afford. It may just be one of those shocks to the system that America needs. A basic right, a credit card, could soon become much more of the privilege it used to be. And about time, too.