Two of the largest British Banks, RBS and HSBC, are trying to reduce risks of their credit card portfolio by restricting new credit card applications to only their current account customers. RBS made these changes on Oct. 1 .These changes also apply to their NatWest brand of credit cards. The bank, 70%-owned by the government, currently has seven million credit-card accounts. HSBC the biggest bank in the UK also has made it clear credit cards are available only to its existing customers. HSBC had made these changes a while back when the credit crunch started.
Analysts view this move by the banks as a way to reduce the risks of their credit card portfolios. Having credit card customers that are also current account holders gives these banks better insight into the customers likelyhood of default as they get visibility into spending habits and repayment history. As a result they can set fees and credit limits appropriate with the risks. Also, in an economy where credit is harder to get this can be a great way to attract new deposits, a valuable source of bank funding.
So far two other major UK banks Barclays PLC and Lloyds Banking Group PLC have not followed suit. A spokeswoman for Lloyds, which issues card under its Halifax, Bank of Scotland and Lloyds brands, said the bank "has no plans to go in that direction."
For the sake of the UK consumers we hope that no further banks will choose to follow RBS and HSBC, as this limits competition and drives up cost of borrowing for the consumers when they need it the most. While we hope no banks follow suit, we expect more banks and building societies will follow suit or restrict their best offers to existing customers.
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