The National Australia Bank (ASX: NAB) took the first step in preparing for the strict government rulings on credit card use by cutting a range of credit card fees.

The move comes a week after discussions with the Treasurer's office in Canberra. The decrease was reported to be part of efforts to keep up with its major competitors in the credit market.

Personal banking group executive Lisa Gray explained the fourth-largest bank in Australia is up to increase its share of the credit card market from 13 percent. “We want to become more competitive across the board and we want to be more competitive in credit cards,” Gray said.

Commonwealth Bank holds 20 percent of the credit car market. The Australia and New Zealand Banking Group has 18 percent and Westpac stands close at 17 percent.

The NAB strategy would involve a rearrangement of the "payment hierarchy" for credit card debt. If most banks direct customer repayments to purchases made at a lower interest rate, NAB would go for cash advances first.

The new scheme would reduce the interest rate for customers unlike in the direct customer repayments in which debt like cash advances accrues at higher rates. NAB also plans to restructure its balance transfer system.

In 2009, NAB abolished $25 over-the-limit fees and cut late payment fees from $30 to $5.