Society removes over-limit fees and reduces interest on spending during balance transfer offer periods
Nationwide Building Society today called for the industry to follow its lead in making credit card charges fairer and easier to understand as it introduced two positive changes aimed at saving customers both money and inconvenience.
Britain’s biggest mutual has removed the £12 fee for those going over an agreed credit limit. It has also made a positive change to its products in relation to how customers are charged interest when they complete a promotional balance transfer and subsequently makes a purchase.
Nationwide customers are expected to save around £2.6 million a year as a result of the changes. However, the Society is calling for its competitors to follow its example, a move that could save credit card borrowers across the industry approximately £110 million a year.
Across the market, credit card borrowers utilising a balance transfer offer who then spend on the card are charged interest on the full purchase amount, even if they pay off the entire purchase amount. This is because the balance transfer remains on the card and as such they are deemed not to have cleared the debt in full. Nationwide thinks this is unfair to borrowers and is therefore splitting the functions of the card so that the balance transfer is treated separately during the interest free period. This will work as follows:
Customer transferring a £5,000 balance during the introductory period who goes on to spend £1,000 on the card Customer pays £1,000 off at the end of the month.
- Monthly interest cost with other provider (based on typical industry 18.9% APR): £23.20
- Monthly interest cost to Nationwide customer (based on 15.9% APR Representative [variable]): £0
As well as having a competitive APR, Nationwide has a history of doing the right thing for credit card customers. These include:
- Becoming the first major provider to offer a positive order of payments, meaning the most expensive debt is paid off first. This has now been introduced as standard practice by the regulator.
- Offering a grace period when customers miss a payment during an introductory purchase offer, whereas other providers end the intro deal at that point.
- Offering soft quotes at the credit card application stage, meaning customers receive their credit limit and APR prior to getting a full quote, which impacts credit scores.
- Offering the same deals regardless of whether applying online, over the phone or in branch.
These changes come at a time when some of our competitors are removing reward schemes on their cards due to the reduction in interchange. Nationwide has no current plans to withdraw its cashback reward scheme available on its Select credit card and the Society continues to look at ways it can help credit card customers with more changes planned for later this year.
Chris Rhodes, Nationwide’s Executive Director for Group Retail, said: “As a mutual, we’re always looking to make our business fairer and more customer friendly and we believe this is the right thing to do for our customers. We would like to see these positive changes followed by the industry as the benefits for the customer far outweigh the relatively small costs for the business. The changes we have introduced will together save our customers around £2.6 million each year but the peace of mind factor is perhaps considerably more valuable.
“Credit card borrowers get real benefit from balance transfer offers, but many also want to also use the card for their everyday spending. Historically, industry experts have advised against this because of the additional interest they may end up being charged if they don’t pay the total balance off at the end of the month. We don’t think that’s fair, so we’ve changed the way we charge interest in these circumstances so that the balance transfer and purchases are effectively kept separately. We’ve also removed the over-limit fee in recognition of the fact that people do unintentionally exceed their limit from time to time.”