Barclaycard recently announced a major change in its debt repayment structure, reducing the minimum monthly payment to £5 for all customers starting July 22nd. While this may superficially appear to provide relief for those facing financial difficulties, financial expert Martin Lewis has raised alarms, describing it as a ‘huge danger signal.’ The new minimum payment of £5 is significantly lower than the previous requirement of 3.75% of the debt or 2.5% of the balance. This means that customers making only the minimum payments will only cover the interest charges, not reducing their overall debt. According to calculations by MoneySavingExpert.com, a customer with a £1,000 debt under the new system would pay almost £1,000 more in interest to Barclays than under the old system. The repayment period would also double, taking around two decades to clear the debt. Lewis emphasizes that paying only the minimum on credit card debt can essentially double the total cost of the debt, resulting in hundreds or thousands of pounds in additional charges. He urges Barclaycard customers to be aware of this potential pitfall and, if only making minimum payments, to consider making a fixed monthly repayment based on their financial capabilities. By repaying more than the minimum, borrowers can significantly reduce the length of their debt and the overall interest costs. In summary, Barclaycard’s reduction in minimum payments may seem like a gesture of flexibility, but it carries the risk of prolonging debt and accumulating additional interest charges. Customers are advised to carefully consider their repayment strategy and, if necessary, seek professional financial advice to manage their debt effectively.
Barclaycard Minimum Payments Cut to £5, But Martin Lewis Warns of Hidden Danger
