Nationwide credit card customers will no longer be charged for going over their limit from today, while the way it charges interest for those with balance transfer credit cards is also changing. But will other credit card providers follow suit?
The changes, which apply to both new and existing cardholders, see Nationwide remove the £12 fee it charges customers when they exceed their agreed credit limit on its entire range of five credit card products.
It previously charged customers £12/month when they went over their limit. The building society has also changed the way it calculates interest on its four balance transfer credit cards today.
So now when a customer transfers debt onto a Nationwide card to take advantage of 0% interest rates (on the amount transferred) they won’t be charged interest on spending – as long as they pay off the purchase amount in full every month – even if they have a balance transfer amount still outstanding.
Nationwide says it has made the change in a bid to make its charges "fairer" and it is challenging other providers to do the same.
So how does this work in practice?
As an example, Nationwide has a 26-month 0% interest balance transfer period on its long-term 'Balance Transfer' card. But the 0% interest spending period on this card is only three months long. After three months, the card charges up to 19.9% APR on purchases.
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So let's say you transfer £3,000 of debt to this card to take advantage of the 26-month interest-free period. Any spending undertaken during the first three months will be interest free anyway as long as you make at least the minimum repayment, but you should always repay in full.
But if you continue spending after the 0% interest spending period ends, if you then repay any spending in full at the end of the month, you won't be charged interest on the purchases.
Previously, even if you'd repaid any spending in full, you would still have had to pay interest on the purchases, because the balance transfer debt meant the card hadn't been cleared in full.
These changes are for the life of the card, although obviously when any 0% balance transfer promotional period ends, you should shift the debt elsewhere if it's not paid off.
But ONLY spend on a balance transfer card if there's an interest-free purchase period
Where you have credit card debts, anything you repay goes towards paying the transactions that have highest interest rate first.
But if you have a card with transferred debt on it and there's no interest free spending period or it has ended, and you do spend on the card, you'll be charged interest on purchases from the day you made the purchase up until the day you pay off the purchase in full.
The problem is card providers don't treat purchases and balance transfer debt separately, so they'll charge interest on the entire balance until it's paid off in full.
'Good move from Nationwide, but better cards available'
MoneySavingExpert.com money analyst Helen Saxon says: "This is a good move from Nationwide which will benefit its customers who have a balance transfer but don't want to apply for a new, separate card for spending on.
"We've always said people shouldn't spend on balance transfer cards, and for the majority of balance transfer users, this will still be the case. However, Nationwide balance transfer users now have a free pass.
"That said, this isn't a reason to get a Nationwide card, as none of its deals is market leading, and those already with a card should consider checking whether they can get a better deal elsewhere."
Are other credit card providers going to follow suit?
We asked seven major credit card providers (listed below) that offer balance transfer cards with introductory 0% interest periods whether they had plans to remove the over-limit fee on any of their cards, and whether they'll adjust how they treat balance transfer and purchases debt.
On exceeding credit limits, each provider either said it had no plans to remove the fee or refused to comment. All currently charge a £12 fee when customers exceed their limit, although some charge once per month, others each time the limit is exceeded. Santander will charge the fee only if you are still over the credit limit on the statement date.
On treating balance transfer and purchase debt on a credit card separately, again the providers either said they had no plans at present to do so, or they refused to comment. These are providers we asked:
- Clydesdale and Yorkshire Banks
- Tesco Bank
Should I switch my credit card provider?
See our 0% Balance Transfers and Spending guide for the best buys for those who want to both spend and transfer debt onto a balance transfer card. Remember to always get a deal that offers a 0% period on both.
Always ensure you pay off or transfer your balance before ditching your card for a cheaper deal.