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Some issuers in the United Kingdom are trying to give consumers second thoughts about taking out credit cards. The Royal Bank of Scotland this week said it would issue credit cards only to customers who have or agree to open accounts with the bank (CardLine Global, 8 Oct.).. The bank hopes the policy, which took effect on 1 Oct., will reduce the risk of default. The bank, bailed out last year by the UK government, has about 13 million customers and 7 million credit cardholders. The policy also applies to National Westminster Bank PLC, a financial institution better know as NatWest that is part of the RBS group. RBS follows the lead of UK-based HSBC Holdings PLC, which about 14 months took a similar step, a spokesperson for the financial institution says. "We prefer to know [our] customers," the spokesperson says, claiming the policy has worked. "The risk curve [for credit cards] has gone down dramatically." The spokesperson declined to offer specific details. HSBC issues MasterCard- and Visa-branded cards. Though the spokesperson would not reveal how many credit cards the bank has issued, he says the issuer has 8% "of the credit card market in the UK." Financial institutions have issued more than 66 million credit cards in the UK, according to the UK Cards Association, an issuer trade group. Neither the HSBC spokesperson nor a representative of the trade group know of other UK issuers that have enacted similar policies. Signs points to increasing risks for lenders, however. Annualized charge-offs reached 9.37% of credit card loans in May, up from 6.4% for the same month last year, according to Moody's Investors Service. National Debtline, a UK-based advisory agency, reported that calls from consumers worried about credit cards and other loans increased to 41,000 in May, up from 20,000 for the same month last year. Other UK issuers have taken steps to provide customers and potential customers more information about credit cards. In August, Barclaycard, which has nearly 12 million UK customers, introduced a service that seeks to identify cardholders whose spending and account behavior could indicate default risk . The issuer contacts customers through phone calls, text messages and statement inserts. Cardholders deemed at risk can receive reduced minimum payments or referrals to debt-management agencies. In September, Barclaycard launched a Web site that enables potential customers to measure their chances of being approved for a credit card. The service saves unsure consumers from having to complete a full application, a step that potentially can affect credit ratings.
