The Royal Bank of Scotland (RBS) has decided to delay the introduction of a cut-price credit card due to the significant level of consumer debt and sluggish growth. The decision came at a time when the UK consumer credit is closely monitored by the Bank of England notably following warnings of the Citizens Advice charity network.
In 2014, the RBS announced the future creation of a 0% interest rate credit card. Nevertheless, Ross McEwan – Chief Executive at the RBS – recently declared that consumer debt is too high to consider introducing such a card, and that the priority is to encourage consumers to repay their loans. As of now, UK consumers accumulated around £200 billion in lending, of which £65 billion comes from credit card debts. McEwan also expressed his concerns regarding zero-balance transfers, which enable consumers to subscribe to a new card in order to pay off an old one at a 0% rate for a limited time only. Once the offer ends, consumers are often surprised to see an increase in borrowing costs and struggle to deal with the new rate. In addition, figures indicate that half of consumers are unable to pay off their debts even during interest-free periods.
The Bank of England is closely examining the debt market and has already warned that measures could be introduced to curb rising household debt, which has been growing by 10% annually. The central bank also required lending institutions to collect £11.4 billion of extra capital by March 2019 and warned lenders in the car market to be especially cautious.
To read the original article, please click here.