NatWest re-enters 0% balance transfer market after 5 year absence

NatWest does a U-turn on 0% credit cards five years after scrapping them, but is its new 23-month balance transfer offer any good?

  • RBS / NatWest boss said in 2014 that 0% teaser rates were ‘absolutely abhorrent’
  • However, NatWest said its withdrawal left customers without a valuable option
  • The new card does not have the longest term but comes with no fees
  • The bank said the priority was on helping customers pay down debt – and the card comes with a suite of features designed to help with that 

NatWest denied it was reneging on a five-year-old pledge to no longer offer teaser credit cards, as it announced it was re-entering the market.

Bringing back a 0 per cent balance transfer credit card is a U-turn for the High Street banking giant. However, its head of personal banking said the March 2014 decision was ‘right at the time’, but the withdrawal ‘left many of our customers without an option they found valuable’.

NatWest’s new 0 per cent offer lasts for 23 months before reverting to 19.9 per cent APR, and crucially is open only to existing customers transferring up to £20,000. 

It comes with no annual fee as well as 0 per cent on purchases for the first three months.

Taxpayer owned NatWest pulled out of the balance transfer market in 2014, but now it’s back – after it said there was demand from customers for the product

The bank, and its stablemate RBS, pulled out of the balance transfer market five years ago in response to what chief executive Ross McEwan called ‘absolutely abhorrent’ teaser rates.  

Such credit cards are often seen as an effective way for customers to pay down their debts by taking advantage of an interest-rate freeze, but many don’t manage to do this making the cards profitable for banks as they then slip onto rates approaching 20 per cent.

The bank said at the time two-thirds of its balance transfer customers didn’t pay their debts off before the introductory rate expired.

The RBS boss recently announced that he would be stepping down, stating that he was leaving the bailed out bank in ‘much stronger financial position’ than when he joined over five years ago. 

NatWest claimed the new card ‘represents a significant step forward’ and had been ‘launched in response to customer demand and developed in line with principles to ensure we help our customers take control of their finances’.

As well as no balance transfer fees and not penalising customers for late or missed payments, NatWest said features launched alongside the card will help borrowers.

These include a repayment calculator to show customers how to pay down their debts, the ability to lock and unlock the card and restrict certain types of spending, and ‘regular check ins’ and reminders of their financial health and outstanding balance over the 23 month period.

Those who don’t pay their balance off at the end of the 0 per cent introductory period will also be offered guidance on how to pay off their debt, the bank said.

NatWest’s personal banking chief executive Les Matheson told The Sunday Times ‘What’s different with our card is the focus on paying off the debt — the reminders to pay it down so that customers don’t get to the end of the interest-free period and they have forgotten’.

The taxpayer-owned bank’s re-entry into the market comes at a time when balance transfer offers are slowly shrinking, thanks principally to an FCA crackdown on credit card providers. 

RBS boss Ross McEwan recently announced that he would be stepping down

RBS boss Ross McEwan recently announced that he would be stepping down

In March, This is Money reported that the longest 0 per cent introductory term fell below 30 months for the first time since December 2013, with more than a quarter of zero interest deals disappearing in two years.

Andrew Hagger, of personal finance website Moneycomms, said the move was ‘an interesting U-turn from NatWest – perhaps abstaining from the 0 per cent market has seen a drop off in revenue.

He added: ’23 months isn’t going to trouble the best buys though, there are plenty of card deals offering 28 or 29 months on balance transfers.

‘The battle in the 0 per cent market has cooled markedly having found its level again in the last three months, but I can’t see rival card lenders getting too worked up over the NatWest about turn.’

Currently the longest 0 per cent deal is 29 months, which is offered by Sainsbury’s Bank. That card however charges a 1.5 per cent balance transfer fee with a minimum of £3, and comes with a 19.95 per cent APR.