Credit Card Overview
Fact: there are more credit cards than people in Britain and the country's debt problems are amongst the worst in the world.
When choosing a card provider, its policies on responsible lending and debt advice provision are of key importance. The green and ethical concerns you bring to who you bank with, concerns about equal opportunities or the environment, are just as applicable to who you get your credit card from.
This section also looks at the green or ethical worth, as well as the practicalities of charity affinity cards.
Does your credit card provider treat its customers responsibly?
What are charity affinity cards and how do they work?
Does your credit card provider treat its customers responsibly?
Responsible lending
According to the British Banker's Association (BBA), responsible lending means 'providing credit, based on background checks and professional judgement, to people who can accommodate repayments without getting into financial difficulty'. As the sheer number of people in debt today shows, these principles are not always well applied by credit lending institutions. In 2008 our credit card debt hit £54.4bn and continues to rise.
Transparency is key - credit card customers should be presented with the terms and conditions attached to their card up front and in plain English. It is important to check whether your provider has a responsible lending policy in place, and how it is implemented if it does exist.
Debt management
Credit card debt is all too common in the UK. Some financial institutions offer basic in-house debt advice services, the scope of which can vary greatly. Often providers will refer customers to free advice services including the Consumer Credit Counselling Service, the Citizens Advice Bureau and others.
Use our search tool to find details of your provider's debt management services. Information on this subject can be found under 'Responsibility toward Customers'. Alternatively contact your provider directly for further information.
What are charity affinity cards and how do they work?
Affinity card providers make a small donation on behalf of the card holder to the charity it is associated with.
Such charity donations average around 25p per £100 spent. So, in order to donate £100 to your charity of choice you'd have to spend £40,000 with the card. Most providers also make a one-off donation of between £5 and £25 on each new card account.
In their analysis of charity affinity cards moneysavingexpert.com suggest that a more effective way to donate money is to use cash back cards. Cash back cards operate in much the same way as affinity cards except that instead of a charity, additional money goes to the card holder and this money is usually considerably more than a standard charity card donation. The cash back card holder can then donate the money they have earned to the charity of their choice and if eligible, Gift Aid it, so rather than £1 the charity will receive £1.28. Donations on affinity cards are not eligible for Gift Aid.
View the range of charity affinity cards available on the market click here.
Your next steps
See our guide Next Steps - Credit Cards for more suggestions on how to find out about your credit card provider's green and ethical policies, how to contact them and how to find the right credit card for you.
Credit Card Search
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Credit Card Provider
Egg
Green/Ethical Products
None
Ethical Lending or Insurance
No evidence of an ethical lending policy.
Responsible Lending
1. Credit Lending
Egg offers 95% LTV (loan-to-value) rates for two and three year fixed-rate mortgages (2007). This does not compare favourably with the FSA’s Turner Review which suggests that LTV rates be set at 90%, i.e. that borrowers should have at least a 10% deposit for a mortgage. Egg has not publicly disclosed its LTI (loan-to-income) rate for mortgage products. The Turner Review’s analysis suggests lending to 3.5 times of income for single applicants.
However, Egg indicates that it has stopped offering mortgage products. Though the above rates still apply to existing customers.
In terms of conducting checks into the credit history of customers seeking unsecured credit, Egg indicates that it ‘may’ conduct checks with credit reference agencies but specific details are not supplied publicly.
2. Debt Warning
The bank issues the generic warning to mortgage customers: ‘Your home may be repossessed if you do not keep up repayments on your mortgage.’
For unsecured loans the bank provides some general guidelines for customers to avoid getting into debt. These include checking the balance on accounts before making withdrawals, repaying more the minimum amount, paying on time and stressing the importance of budgeting.
The bank does not use the FSA Debt Test or an equivalent. This facility is designed to help customers find out whether they have, or are likely to have, problems with borrowing. It also has tips on what to do if customers find themselves in difficulty.
3. Debt Management and Advice
No information was found regarding the bank’s policies on payment default and handling payment problems, or the stages involved in the repossession process or before court action, on secured loans (mortgages).
With regard to unsecured loans the bank states that it might offer a number of options, including arranging an affordable payment plan; short-term reduced payments; amending payment dates; temporarily increasing the credit limit on cards; and altering payment schedules.
Payment holidays are offered on the bank’s two and three-year fixed-rate mortgages but the possible duration of these are not stated. With regard to unsecured credit, information was found for Egg’s credit cards which states: ‘We [the bank] may allow you [the customer] occasional payment holidays. If we do this, we will still charge interest as if a payment was due during the payment holiday.’
No public data was found as to whether or not the bank offers re-housing advice to customers whose homes have been repossessed or whether it liaises with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements.
Financial Exclusion
No evidence of policy or products.
Environment
The company’s environmental policy refers to the key areas of climate change/energy efficiency and waste management. However, there is no evidence of a long term commitment to continued improvement of its environmental performance.
Carbon Neutral
No evidence was found of a pledge on making business operations carbon neutral.
Equal Opportunities
Egg has a non-discrimination policy for employees but does not cover disability and sexual orientation.
Women on the Board
No data found.
Voluntary Standards & Initiatives
No evidence that Egg is a signatory to any charters or initiatives. Its parent company, Citigroup, is a signatory/member of the following:
Egg
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Travel, Emergency)
