'Cash back' for RBS and Natwest card transfers

Credit: D K Grove/Shutterstock.com

Until August, anyone transferring a balance to one of the sister banks' Clear Rate Platinum credit cards will get 1% of that sum subtracted from their balance, up to a total of £50.

The move comes just over a year after the banks ditched promotional 0% offers on transfers and purchases.

No 'teaser rate debt traps'

The blurb on both sites proudly explains that:

"Most credit cards charge you to transfer a balance, but not Clear Rate Platinum. We never charge balance transfer fees, no matter how much you transfer."

That's a clear dig at the majority of other credit card providers, whose 0% promotions come with balance transfer fees of up to 3% but last from a few months up to a few years.

And it's true that while longer balance transfer deals may help the significant numbers who don't pay off their debt by the end of the promotional term, they can't help the sizeable proportion of people who fail to keep to the payment terms.

When they ditched them, RBS called such cards and offers "teaser rate debt traps", with the bank's Moray McDonald saying they would "play no future part in this bank".

There's much to commend the clarity with which RBS and Natwest set out their low rate of 6.9% per annum (variable) for both transfers and purchases, and their £24 annual fee.

But it's perhaps a little less clear what people tempted by their "money off" deal are signing up for.

Here's the perhaps obvious sting in the tail: while customers may benefit from the offer on transfers of up to £5,000, the balance will start incurring interest of at least 6.9% p.a.

Interesting times

Let's explain using the example of the 2011 Halifax Clarity card, which offered 2% back on transfers, up to a maximum of £60.

Transfers were subject to interest of at least 12.9% p.a.

At the time, a card with a comparable standard interest rate offered a 0% transfer promotion lasting 16 months.

The fee for moving a £3,000 balance to the 0% card was about £87 - but the cardholder would then have 16 months to make payments on that balance without incurring any extra charges.

The Halifax cardholder with the best interest rate on offer, by contrast, would get £60 back - but they'd also be liable for more than £500 in interest over the same period.

The advertised interest rate for the Natwest and RBS cards is much lower at 6.9% p.a. - although some customers will end up paying 11.9% p.a. and others will get a rate of 14.9% p.a.

But the principle stands: customers will pay interest on the remainder of the transferred balance.

Unless they can pay off the debt in very short order, they're likely to end up paying more in interest than they can claim back through the offer.

Not quite that bad...

Where cards like this have an advantage, though, is that there are no nasty surprises.

Miss a payment and the promotional rate won't suddenly vanish. There'll be a charge - usually of £12 - for the default, but the debt should continue to attract the same rate of interest it always has.

The criteria for applicants tend to be less strict - annual earnings can be lower, credit histories need not be so pristine.

Finally, although less so in these days of three-year balance transfer deals, there's a little less pressure to pay off a debt in a set amount of time with a low-interest card.

There's more on whether low interest or no interest cards are better under different circumstances in our guide here.