Barclaycard, the UK’s largest credit card provider, is making changes to its minimum repayment structure and APR rates, prompting an urgent debt warning from Martin Lewis, founder of MoneySavingExpert.com.
From July 22, Barclaycard customers will pay the highest of the following each month:
* 1% of their balance
* £5
* The amount of interest due
This change is understood to apply to all Barclaycard customers, resulting in 80% of customers’ monthly repayments either reducing or staying the same. However, some customers may see an increase to their APR of up to 9.9 percentage points.
While Barclays said the majority of customers will see their APR stay the same or go down, experts have warned that paying less in minimum repayments means you could end up paying more long-term. This is because more interest will end up being applied to your outstanding balance as less is being paid down each month.
A customer with a £5,000 balance currently paying £179.92 with an APR of 29.9% would clear their balance by December 2027 and pay £2,824 in interest in total. If they reduced their minimum payment to £142.24, they would not clear the balance until January 2030 and would end up paying back a huge £4,709 in interest.
Martin Lewis warns that this seemingly technical and bland change is a huge danger signal, as it can easily double the total cost of debt by the time you clear what you owe.
Experts advise against sticking to the minimum repayment and instead paying as much as you can afford each month to avoid paying more interest in the long run. If possible, paying off your total credit card balance every month is the best way to avoid interest altogether.
Before taking on credit card debt, it is important to remember that banks can always increase the minimum repayments they demand each month. It also pays to get the best credit card deal on the market, so it’s a good idea to shop around before applying.
If you are struggling with debt, there are several groups which can help you with your problem debts for free. You can also find information about Debt Management Plans (DMP) and Individual Voluntary Agreements (IVA) by visiting MoneyHelper.org.uk or Gov.UK.
