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21 May 2019

RBS and NatWest make U-turn on 0% credit card promise

The new cards come with fee-free 0% balance transfers for 23 months

With the launch of a new 0% balance transfer credit card, Royal Bank of Scotland (RBS) and NatWest have backtracked on a pledge made more than five years ago to stop offering 'teaser' rates. But is this actually good news for borrowers?

In February 2014, RBS announced a new strategy to be 'simpler, smaller and smarter'. This included banning 0% introductory periods on credit cards, amid concerns customers weren't actually clearing their debts.

Now the bank has changed its position, citing research that customers value the option of a 0% deal, and claiming their new offer sets high standards for transparency.

Here, we look at the new NatWest and RBS balance transfer credit cards and how to make 0% promotional deals work for you.

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The new NatWest and RBS credit cards

A balance-transfer deals allows you to shift existing debt from an expensive credit card to one with an interest-free period.

With the new NatWest Balance Transfer Credit Card and RBS Balance Transfer Credit Card, you'll benefit from 23 months at 0% interest. You won't pay a fee to move your debt to these cards, ranking them among the cheapest balance transfer deals.

However, you will need to make a balance transfer of at least £100 within three months of opening the account.

The cards are only available to existing NatWest and RBS customers who have a current account, savings account or mortgage.

You'll be offered features to help you manage your debt, including a repayment calculator and a guide on how to pay down your balance by the end of the interest-free period. You'll also have the ability to lock the card and restrict certain types of spending.

Plus unlike many other providers, NatWest and RBS promise the interest-free offer will continue even if a customer makes a mistake, such as missing a payment or going over their limit.

How the new deal compares

Here's how the new RBS and NatWest deals compare to other fee-free 0% balance transfer credit cards.

Credit card0% balance transfer period0% balance transfer feeRepresentative APR
Santander All in One Credit Card*26 monthsNone21.7%
NatWest Balance Transfer Credit Card**23 monthsNone19.9%
RBS Balance Transfer Credit Card**23 monthsNone19.9%
Sainsbury's Bank No Balance Transfer Fee Credit Card22 monthsNone20.9%
Tesco Bank Clubcard 20-Month Balance Transfer Credit Card20 monthsNone19.9%
Halifax 20-Month Balance Transfer Credit Card20 monthsNone19.9%
Lloyds Bank Platinum 20-Month Balance Transfer Credit Card20 monthsNone19.9%

*Card comes with a £3 monthly fee

**Only available to existing customers

Right now, the Santander All in One Credit Card offers the longest 0% balance transfer offer, at 26 months, and you won't pay a fee to make the initial transfer. However, you will face a £3 monthly charge.

The new RBS and NatWest deals offer a shorter 23-month 0% period, but have no annual fee, which could make them the cheaper option for you.

That said, the deals are only open to existing NatWest and RBS customers, so may have limited appeal if you don't already have a current account, savings account or mortgage with the brands.

Why have RBS and NatWest done a U-turn?

In 2014, RBS and NatWest withdrew from promotional pricing on credit cards, citing concerns that customers were not paying down their debts.

At the time, the bank noted the average holder of a balance transfer card owed more than £9,000 across multiple cards - and rather than clearing their debt, most people were adding to it.

Five years on, however, following a customer listening exercise and a review of the credit market, the bank now says 80% of customers consider promotional pricing before applying for a deal. Indeed, it suggests there are many situations where a 0% deal can be helpful.

RBS and NatWest say now is the 'right time' to return to the market with a product that offers value and sets high standards on transparency,

Les Matheson, CEO of Personal Banking for NatWest, said: 'Since withdrawing from this market, we've seen our customers continue to demand this type of card and continue to accrue debt.

'This decision was right at the time, but having listened to our customers, we recognise that this left many of them without an option they found valuable.

'We felt we could better meet the needs of our customers by creating a card which offers a great deal combined with tools to help them pay down their debt and better control their finances.'

How to use 0% credit cards effectively

A 0% balance transfer credit card can be helpful if you want to pay down credit card debt.

These deals allow you to shift debt from a high-interest card to one offering an interest-free period. This gives you breathing room to focus on paying back what you owe.

However, the 0% period will not last forever. To use these cards effectively, you'll need to pay off the balance before it ends and interest kicks in.

With the RBS and NatWest deal, you have 23 months at 0% before reverting to the standard rate of 19.9%. Someone with a £2,000 debt would need to make 23 monthly repayments of at least £86.96 to clear their debt in time.

Another important rule is not to use a balance transfer card for new purchases. You'll generally be charged a different interest rate on any new debts, and this will apply much sooner. The NatWest and RBS card, for example, only offers three months of interest-free spending.

With some cards, you may also risk losing the interest-free period on your balance transfer if you miss a payment, exceed your card limit or otherwise breach the terms and conditions. So make sure you fully understand how your card works before signing up.

If you don't manage to clear your debt in time, you could try moving to a new balance transfer credit card, but there's no guarantee a new deal will be available or you'll be accepted. For that reason, it's best to focus on paying down your debt before the 0% period ends by sticking to a payment plan.

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.