By Sean Poulter
Last updated at 4:30 PM on 05th October 2009

HSBC rations credit cards to existing customers only

Exclusive: HSBC and RBS are currently rationing credit cards to their existing customers only to minimise risk

Two of Britain's biggest banks are rationing new credit cards to existing customers only.

The moves confirm fears that High Street banks are limiting access to all forms of credit, including mortgages, personal loans and overdrafts.

RBS and its sister brand NatWest state on their websites that new credit cards, which carry various perks, are limited 'exclusively to existing RBS current account customers'.

Similarly, HSBC, which is the UK's biggest bank, makes clear that its credit cards are 'currently' only available to existing current account customers.

Access to credit on fair terms is vital to oil the wheels of the economy, which is why the Bank of England has pumped more than 175 billion into the finance system through quantitative easing.

However, there are concerns that the banks are effectively hoarding this cash and refusing to lend, so derailing economic recovery.

Critics say the rationing of credit cards and other types of finance is limiting competition and so driving up the cost of borrowing.

The RBS group, which is 70 per cent owned by the taxpayer, is among a number of financial institutions that have been propped up with billions of pounds in public cash.

These banks are now rebuilding their financial standing by imposing strict controls on which customers they will take on and charging record profit margins.

In some cases, people are simply being refused credit if they do not achieve the highest possible consumer credit scores.

While in others, finance giants have put up the cost of borrowing to a point where many people are priced out of the market.

Personal finance expert at price comparison website, uSwitch.com, Louise Bond, said she expects other credit card providers to follow RBS and HSBC.

'This move minimises the risk for banks but at the same time it also limits consumer choice,' she said.

'With a market leading 15 month 0per cent balance transfer credit card, it's quite disappointing that the RBS deal is only open to customers that have a current account.' 

In a telling move, the RBS group's restriction on issuing cards does not relate to new customers who are wealthy, with well-paid jobs, who would qualify for one of its prestige 'Black' credit cards. 

Miss Bond said the banks have taken the decision to ration cards because they want to protect themselves against people defaulting on their payments.

'When a financial provider looks at the credit history of an existing customer they have a wide range of data available to assess the risk of the applicant.

'When it comes to new customers, they are often reliant on scant credit reports which do not reflect the day to day spending habits of the customer,' she said.

She said there is evidence of other banks and building societies restricting various types of finance to existing customers where they already hold a lot of financial information.

'Across the industry it seems the trend for offering the best deals to existing customers only is also appearing in the personal loans market,' she said.

She said the average rate charged by a bank or building society to an existing customer for a personal loan is 7.94 per cent, however it is a higher 8.08 per cent for a new customer.

RBS confirmed that it will not provide credit cards to people who are not currently customers.

However, it said it would provide a card if the customer first opens a current account and passes its vetting procedure.

A spokesman said: 'We are focussing where we can on helping our current account customers, savers and mortgage borrowers and this move helps us improve the service we can provide to them.

'We are very much open for business and welcome new customers who want a current account and a market leading credit card from us.'

HSBC confirmed it is only offering cards to existing customers. It said this had been the policy since the credit crunch struck 18 months ago.

Here's what readers have had to say so far. Why not add your thoughts below, or debate this issue live on our message boards.

The comments below have not been moderated.

The banks and credit card companies allowed me to run up debts exceeding 60,000 by continually making more money available to me by increasing credit limits and sending me cheques with interest free offers.

I was propping up a failing business with this money in the hope I could turn it around. The business finally failed and I am going bankrupt. They will lose this money, which is presumably going to be paid collectively by their other customers. I am happier than I have been for years to have this load lifted from me. It is a great sense of freedom. A way to walk away from my obligations.

If credit cards and credit had been harder to come by the business would have failed earlier reducing the cost to society of its failure.

So maybe making credit hard to come by is a good thing.

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So in other words, to get the credit card one just has to open a current account with couple of months of money inflow and outflow.. is that what we call restricting people from taking credit.. hmmm.....

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One expects the banks, like any other business, to make reasonable profits, but I find it outrageous that having deposited money in my current account to pay for major refurnishment etc while having a credit card with a major bank, that I am charged 100 times more for credit than I receive in interest.

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Well, what do you know? They're getting more like German banks. Is this going to be blamed on being in the EU? Or on common sense getting the upper hand for once?

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Don't journalists have ANY other word to describe money than "CASH" ????????

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About time too until people can show that they are able to manage money effectivly over a couple of years they should not be given credit cards.

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