The shrinking growth of the British credit card market has again raised the question of the issuance of cut-price, or low-rate, credit cards. Many UK Consumers expected the Royal Bank of Scotland (RBS), 70% of which is owned by the taxpayer, to add such a new card to its portfolio.
However, RBS has decided not to introduce them to the market for the moment according to the Guardian. Ross McEwan, the CEO, expressed significant concerns about the increasing debt of the British population. He promised to conduct market analysis again next year and to reconsider his position if needed.
During the press conference on the topic, McEwan commented that zero interest credit cards could often be misleading to consumers. Many British consumers get one (or more) just to cover previous debts. However, they often make the mistake of burying themselves in further credit card debt. On top of that, there are hidden charges and up-front fees for which consumers are not always well aware of.
McEwan advised that all people should think twice before acquiring a low rate card. He also recommended everyone to pay off the current debts first before entering into another. Such advice falls in line with the decision to withhold the new card, and a recent report by the Bank of England supported his words.
According to its findings, the British credit market has grown by ten percent year over year, while household income marked an increase of only 1.5 percent. The current amount of debt, amassed by domestic households, exceeds £200 billion according to the watchdog. Moreover, the report has also revealed that many people have been struggling to repay their debts. Looking at balances after an interest-free period of certain low-rate credit cards, experts noticed that half did not decrease since the offer started.
In light of the gloomy clouds over the credit card arena, the Royal Bank of Scotland recently entered into the car finance market by introducing a personal contract purchase product for its NatWest account holders. However, the innovative approach applies only to small amounts, which typically involve second-hand cars. When the bank offers this product to the clients, it informs them about the terms and conditions of other standard loans for the same purchase.
At the end of the contract, the customers can decide whether to retain the car and pay the remaining amount or to return the keys. In contrast to this new product, consumers do not have the choice of returning a low-rate credit card, justifying further the move to keep the Bank of Scotland card off the market.
Author: Andrew Rombach
Join the LendEDU Newsletter
News, insights, & tips once a weekThanks for submittingPlease Enter a valid email
Credit Cards by Brand
Best Credit Cards by Type