Your Money: Egg hasn't cracked it

As an Egg cardholder, I received an email from the internet bank last week with details of "great new improvements". It explained that Egg is slashing its cashback from 0.5 to 0.1 per cent.

As an Egg cardholder, I received an email from the internet bank last week with details of "great new improvements". It explained that Egg is slashing its cashback from 0.5 to 0.1 per cent.

So far, not so good: I'm a customer who pays off the balance on her plastic every month, and it was the cashback that made the card attractive to me in the first place. As far as I'm concerned, this is not an improvement.

Egg is also introducing 0 per cent on balance transfers for up to five months on the anniversary of when you applied for the card - until 31 December 2006. I applied for my Egg card in November, so every November I will be charged 0 per cent interest on balances switched from other credit and store cards. After five months the rate reverts to Egg's standard 13.9 per cent, which means that if I haven't cleared the balance, I could incur a great deal of interest.

So what's in it for people like me? If the 0 per cent offer related to new purchases, I might benefit by paying the cash I would have used to clear the balance each month into a savings account like ING Direct, which pays 4.5 per cent interest from tomorrow. Then, after five months, I could settle the Egg balance with the money I have saved - leaving me a few quid over as a bonus.

But as I don't have a balance to transfer in the first place, there's no reason for me to take advantage of the offer. And, with my cashback slashed, my Egg card is now far less attractive.

What's also worrying about this offer is that people who don't manage to clear their balances each month may be tempted to overspend knowing they will get some respite with a 0 per cent interest period. But if they don't settle up in five months, they'll be further in debt with more interest to pay.

Egg's research reveals that 76 per cent of customers prefer a 0 per cent balance transfer to cashback. But this leaves 24 per cent of us in the cold. Egg says it hopes to offer improved cashback, perhaps via another card. But, by then, I suspect many of us will have already moved on.

m.bien@independent.co.uk