Ulster Bank has announced the lowest introductory rate in the Irish credit card market at 3.9 per cent, signalling the beginning of a rates war in the sector. The bank is the first Irish financial institution to respond to the challenge from Tesco Personal Finance, which entered the market aggressively in May with an introductory annual percentage rate (APR) of 4.9 per cent, moving to 15.9 per cent on January 1st 2001.

The 3.9 per cent offer from Ulster Bank applies to balance transfers and purchases and is effective until July 2001. Ulster Bank recently reduced its standard rate to 17.9 per cent, making it one of the lowest on the market. The average standard rate for Visa and MasterCard offered by Irish credit card providers is 18.9 per cent. Bank of Ireland has the highest credit card APR at 19.3 per cent and apart from Tesco, another supermarket banking operation, TUSA, offers the lowest at 17.5 per cent. It has operations in the Superquinn chain.

Tesco moved into the Irish market hoping to emulate Bank of Scotland and Northern Rock, whose entrance here shook up the mortgage and deposit account markets. Credit card penetration is relatively low in the Republic at 22 per cent, exactly half the level of the UK.