Royal Bank of Scotland has closed its credit cards to people who do not bank with the group as the taxpayer-backed bank fights against bad debts.

The bank will now accept credit-card applications only from existing RBS and Natwest customers with a current account with the bank. The move does not apply to its Black or Private cards.

The decision is seen as a blow for consumers as more borrowers look to switch their debts to reduce repayments in the recession. RBS had a market-leading balance transfer deal at 0 per cent for 15 months under the BT brand. HSBC also offers 0 per cent for 15 months to current account customers only.

Louise Bond, personal finance expert at comparison firm USwitch.com said: “I certainly don’t think it will be the last time we see a card firm do this. This move minimises the risk for RBS but at the same time it also limits consumer choice.”

She said the change was probably designed to improve the risk profile of the bank’s card business

“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 borrowers should not be tempted to take out RBS’s current account just to get a better card deal – it pays just 0.1 per cent if you are in credit and has a high rate of 19.24 per cent on unauthorised overdrafts.

An RBS spokesman denied the bank had taken the step to reduce the riskm profile of credit card customers. He said: "We are focusing 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."