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RBS Curbs Risk On Credit-Card Portfolio

The bank has limited credit cards to people who have a checking account or open an account with it

Royal Bank of Scotland, in a bid to reduce risk in its credit-card portfolio, has limited credit cards to people who have a checking account with the bank, reported THE WALL STREET JOURNAL.

This step is expected to further strain the UK customers’ ability to get credit, as many banks have tightened standards. RBS made the changes on October 1, 2009, and the move is likely to affect both the bank’s RBS cards and cards issued under its NatWest brand. The bank, 70%-owned by the government, currently has seven million credit-card accounts.

This change would allow the bank to focus on checking account customers, said a spokeswoman of RBS. She added that most of the bank’s current credit-card holders already have a checking account with the bank.

This move is a way to reduce the risk, because a bank can get a better sense of a customer’s payment history if that customer is also an account holder with the bank. The new policy could also help the bank attract deposits, a valuable source of bank funding.

Two other major UK banks, Barclays and Lloyds Banking Group, don’t limit cards to checking-account customers, reported the Journal.