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27 Jun 2019

NatWest launches cheaper interest rate plan for credit cards: can it save you money?

Borrowers can pay back up to four large purchases under the plans

NatWest credit card customers can now spread the cost of up to four expensive purchases and pay them back at a lower rate.

You won't pay any interest under the new Instalment Plans feature, which applies on transactions of between £300 and £3,000. However, you will be charged a fixed monthly fee while paying off your purchase.

We take a closer look at NatWest's new offer for credit card borrowers and other ways to spread the cost of large purchases.

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How NatWest's new offer works

NatWest's new Instalment Plans for credit card customers will give you the option to pay off selected purchases over a set period without paying interest - instead, you're charged a fixed monthly fee.

The offer is meant to appeal to borrowers who would normally pay NatWest's typical purchase APR, which is 18.9% on most of its deals.

Customers can access the offer via their mobile app and choose to spread the cost over six, nine, 12, 18 or 24 months.

You're permitted to have up to four plans at any one time for purchases worth between £300 and £3,000.

The amount you owe will form part of your existing credit limit, and moving a purchase to an Instalment Plan won't alter your available credit.

As there is no extra borrowing - just a change in how you pay the purchase back - there are no additional checks required and it won't affect your credit score.

How much does the Instalment Plan cost?

While the Instalment Plans are interest-free, there is a fixed monthly fee, which will vary depending on your credit history, the size of the purchase and the term length.

NatWest says the typical cost of an Instalment Plan will amount to 10.9% APR, lower than the purchase rate of 18.9% offered on its Reward, Reward Black and Balance Transfer credit cards.

You'll be able to pay off or cancel the Instalment Plan without any penalties.

If you miss two payments, the plan will be cancelled and any outstanding balance will move back to your credit card. This will be treated as a new purchase for the purposes of interest and minimum payment calculations.

While you have an Instalment Plan set up, you'll have to continue making at least the minimum payment on the remaining balance of your credit card. So you should make sure you afford both before making the swap.

  • If you're struggling with credit card debt use our debt tips guide for advice on how to get back on track.

Other ways to spread the cost of a large purchase

If you are looking to spread the cost of a large purchase you may be able to do it for less with a 0% purchase credit card.

The market-leading deal right now is the Barclaycard Platinum, which offers 27 months interest-free purchases from the date you open the account. After the introductory period, you'll pay 19.9% APR.

Alternatively Tesco Bank - a Which? Recommended Provider - is offering 26 months 0% on purchases, reverting to 19.9% APR after the introductory period ends.

An alternative is a low rate credit card, which offers a cheap rate for as long as you have the card.

Tesco Bank offers a market-leading deal charging 5.9% APR.

Alternatively, the Halifax Flexicard Credit Card offers 6.4% APR, and the option of setting up Instalment Plans to help you focus on paying off bigger purchases (from £100) in a way that suits you over up to three years.

If you've already made large purchases on a credit card and are paying big chunks of interest every month, you could be better offer with a top 0% balance transfer credit card.

These cards allow you to move debts from an existing credit card with high interest to an interest-free deal, allowing you to focus on paying off the debt for a number of months.

Virgin Money, MBNA and Halifax are all offering 29 months at 0% interest on balance transfers at the moment, though each charge a one-off fee to move your balance across.

If you're shopping around for a new card, you can compare hundreds of 0% purchase, low rate and 0% balance transfer credit cards using Which? Money Compare.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.