Baby Ace: NatWest and RBS to remove all 0% balance transfer credit cards tomorrow claiming "teaser" rates mean customers lose out

Sunday, March 16, 2014

NatWest and RBS to remove all 0% balance transfer credit cards tomorrow claiming "teaser" rates mean customers lose out

By

Ed Monk

NatWest and RBS will remove all

balance transfer and 0 per cent purchase credit cards from sale

tomorrow as the part-state-owned bank enacts its promise to ends

introductory ‘teaser’ rates.

RBS

chief executive Ross McEwan announced at the end of February that the

bank would no longer offer teaser rates, which he said he found

‘absolutely abhorrent’, as part of an overhaul to make the bank more trusted.

The

bank’s own records show that two thirds of balance transfer customers lose out because they

do not switch their card before they hit punishing interest rates once

their introductory period has expired.

Banking on trust: Customers of NatWest and other RBS bank brands will have a simpler range of products to choose from following the changes.

Balance transfers have become particularly popular in the UK as a means for people to shift debt around without incurring interest. Used properly and they can be the cheapest way to pay off debt.

However, RBS claimed customer behaviour meant they lost out in the end. It said: ‘Credit card market data shows that two thirds don’t switch their 0 per cent card before they hit a payment wall1 and often their rates hike to over 20 per cent.

‘I just don’t like them’: RBS CEO Ross McEwan said the removal of teaser rates was in customers’ interest.

‘They’re also often paying a purchase rate of around 18 per cent or more for the period. This, together, does not help them manage their debt down over time.’

To illustrate that balance transfer cards more often than not lead to customers losing out, RBS published details of its own customer base.

It showed the average holder of a 0 per cent balance transfer card has around £9,000 in debt across multiple cards and does not pay down that debt over the 0 per cent period. In fact, over time, they increase it.

RBS said that 36 per cent of people keep their balance on the 0 per cent card for 7-12 months after the deal has expired, with an average balance of £2,403, and pay about £360 in interest.

To replace its balance transfer cards, RBS is launching The Clear Rate Platinum Credit Card. It has one rate of 6.9 per cent for transferred balances and new purchases and an upfront annual fee of £24.

The ban on teaser rates also means the end of 0 per cent on purchases cards, which offer holders interest free credit to buy goods for a set period. The ban may also mean the end of teaser rates on savings accounts that mean the rate of interest falls dramatically after a period, typically one year.

This is the first of a changes RBS has promised. It will: