Money Insider: credit cards get cheaper

Many of us have yet to wake up to the financial hangover brought on by Christmas and New Year celebrations – but credit card companies are already pitching for our business, writes Gavin Lumsden.

RBS Advanta and NatWest have slashed their interest rates to new lows in a bid to poach custom from people panicked by the cost of their credit card spending.

RBS Advanta (www.rbsadvanta.co.uk), a low cost card provider owned by Royal Bank of Scotland, has today cut its introductory rate for new customers to just 1%. The rate will last for one year and will apply to balances transferred from other cards as well as purchases made with its range of classic, gold and platinum cards.

From 1 January 2003 borrowers will revert to a standard rate currently set at 15.9% for the classic and gold cards and 14.9% for platinum users.

Meanwhile NatWest, one of the higher charging card providers, has introduced a special balance transfer rate of 5.9% on its credit cards. This might not seem that great a deal when 0% rates are widely available. But the good thing about the offer is that the rate is not temporary – NatWest, which is also part of the RBS group, will apply 5.9% for as long as the transferred balance exists.

The bank (www.natwest.co.uk) is also cutting its borrowing rate by 1.5% to 17.4% on its standard card and 16.4% on its gold card. This puts it slightly ahead of Barclaycard, the country’s biggest credit card provider, which charges 17.9%.

NatWest is not worth transferring to if you are an active credit card user. But if you simply want to shift your Christmas borrowings on to a lower interest rate the 5.9% offer is an attractive one.

Both moves by RBS Advanta and NatWest are in reaction to Egg, the online bank owned by Prudential, whose 0% introductory offer remains the most compelling for new credit card customers.

Egg waives all interest on transferred balances and purchases for the first six months and then applies its ongoing variable rate of 12.9%. So if you think you can repay your Christmas debts quickly and want a good standard rate for future borrowing it is well worth considering.

If Egg rejects your application give Lloyds TSB (www.lloydstsb.com) and Co-operative (www.co-operativebank.co.uk) a go. Lloyds TSB charges just 1.9% on transferred balances for six months. It then reverts to its standard rate currently set 11.9%. If you earn more than £25,000 you are eligible for a Co-op Platinum Advantage card charging 0% interest until the end of May and a standard rate of 13.9% thereafter.

If you are still in a spending mood and have a good credit record Capital One Bank (www.capitalone.co.uk) may offer you its nine-month offer of 0% interest on purchases. And don’t forget cahoot (www.cahoot.co.uk) – Abbey National’s online arm – which has no special offers but has a standard rate that goes as low as 8% for some borrowers.