Martin Lewis, a renowned money expert, has issued a warning to Barclaycard customers following the announcement of changes to minimum monthly repayment requirements. From July 22, Barclaycard will implement a new payment scheme, potentially impacting 80% of its customers. This move has sparked concerns that individuals who only make minimum payments could prolong their debt, leading to increased interest charges.
Under the new system, minimum repayments will be calculated based on whichever is highest: 1% of the customer’s main balance, 1% of the customer’s main balance plus any interest, default fees, or account maintenance fees, or the customer’s total outstanding balance, if it is less than £5. This reduction from the previous minimum of 3.75% of the balance means that while people’s repayments will cover their interest, they will clear far less of what they owe, prolonging the debt and accumulating more interest over time.
A calculation by MoneySavingExpert.com, based on £1,000 of Barclaycard debt and a typical Platinum card interest rate, indicated that by only paying the minimum, someone could potentially take around 19 years and three months to clear their debt and pay around £1,655 in interest, under the new system. Under the previous system, they may have potentially taken around nine years and eight months and paid around £699 in interest by paying the minimum.
Lewis urges all Barclaycard customers to be vigilant and consider making fixed monthly payments based on their affordability, even if it exceeds the new minimums. He emphasizes that this approach can radically reduce the length of time in debt and the interest cost. Barclaycard, however, maintains that the changes aim to provide greater flexibility and support for customers with persistent debt.
A spokesperson for Barclaycard stated: “We regularly review our products and from July, some Barclaycard customers will see changes to their minimum monthly payments, alongside adjustments to the APR. Customers will benefit from a reduction in their minimum monthly repayment and the vast majority have no change to APR, while some will receive a decrease.”
