Nationwide ends credit limit and purchase charges on 0% credit cards

The building society is scrapping two charges on its balance transfer credit cards.

Nationwide is scrapping two "unfair" charges on its 0% balance transfer credit cards and is challenging its competitors to do the same.

From 1st May, the UK’s largest building society will end the £12 fee slapped on customers for going over an agreed credit limit.

It’s also changing how credit card users are charged interest when they have made taken out a credit card with a promotional 0% balance transfer deal but then go on to make a purchase on the card too.

Nationwide says its customers will save around £2.6 million a year as a result of the changes.

Sneaky charges

Normally you won’t incur any interest on what you spend on a credit card, as long as you pay your balance off in full at the end of the month.

However, borrowers that have taken advantage of a 0% balance transfer offer to shift some debt and then go on to spend on the card aren’t treated in the same way and have to pay interest on their spending, even if they pay it back in full each month.

This is because the cardholder is deemed not to have paid off their balance in full, as an outstanding debt remains on the card in the shape of the balance transfer. So paying back just what you spend on new purchases isn’t enough to prevent interest being charged.

Of course you could argue that the purpose of a 0% balance transfer credit card is to help you clear debt, not build up more. But the reality is some people use their cards for new purchases and are being penalised unless they also have a promotional 0% period on purchases to take advantage of too.

[Related story: The top 10 0% balance transfer credit cards]

Making charges fairer

Nationwide’s new system will treat balance transfers separately from what is spent on new purchases during the 0% balance transfer period.

So someone transferring a £5,000 balance during an introductory period for 0% balance transfers who goes on to spend £100 on the same card but pays it back by the end of the month won’t be charged any interest.

Challenging the industry

Nationwide estimates that credit card borrowers across the UK could save £110 million a year if other providers adopted the same method.

And it's challenging competitors to follow its example.

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.”

This isn’t the first time Nationwide has taken the lead in order to make charges fairer for its customers.

It was also the first major provider to offer a positive order of payments, which is a system whereby repayments are used to pay off the most expensive debt first. This is now standard practice in the industry.

More improvements planned

Nationwide’s changes come at a time of unrest for the credit card industry.

A couple of providers have scrapped reward schemes because of a European Parliament decision to cap the interchange fees they can charge businesses.

But Nationwide says it has no plans to withdraw the cashback reward scheme which is available on the Select Credit Card and is actually promising more positive changes to help credit card customers later this year.

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