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Barclaycard's cutting minimum repayments – you could be in debt YEARS longer paying DOUBLE the interest

If you've got debt on a Barclaycard, it's likely the minimum you have to repay each month will be cut from July, as the bank is changing how repayments are set for millions of customers. If you're unaware and pay interest (so aren't on a 0% deal), and don't act, you could stay in debt for many years longer and pay possibly £1,000s more in interest.

As long as they follow the basic regulations, credit card providers can set their own minimum repayment amounts – this must always cover at least the interest and is usually the higher of a small percentage of your debt, or a set amount (typically £5).

Barclaycard's new minimum repayments

From 22 July 2024, Barclaycard is reducing the proportion of debt many of its customers have to repay as the monthly minimum. So, if you currently only pay the minimum on your card and do nothing, you'll likely repay less each month.

Minimum repayments are already designed to keep you in debt for as long as possible, because they decrease as your debt does – and lowering them just amplifies this effect.

Shockingly, the change means that it will now typically take you a DECADE longer and cost you nearly £1,000 more than it did before to clear a £1,000 debt:

Paying off a £1,000 Barclaycard debt – costs compared (i)

Paying CURRENT monthly minimum Paying NEW monthly minimum
How your repayment is calculated

On MOST Barclaycards, including Avios, Platinum and Rewards (ii)

The highest of:


- 3.75% of your balance

 

OR

 

- 2.5% of your balance plus interest

 

OR

 

- £5

On ALL Barclaycards, from 22 July 2024

The highest of:

- 1% of your balance

OR
 

- 1% of your balance plus interest

OR


- £5

Time it would take you to fully clear debt
Nine years and eight months 19 years and three months
Total interest you'd pay
£699 £1,655

(i) Assuming an APR of 24.9% (the typical Platinum card rate) and that you don't spend any more on the card. (ii) This is the typical calculation for most Barclaycards. The exception is the Forward card, where it's the highest of: 4.25% of your balance, 3% of your balance plus interest, or £5.

You'll be given at least 60 days' notice of the change, during which time you can opt to close your account and repay your balance under your existing terms – if not, you'll be automatically rolled on to the new system.

In an email sent to customers, Barclaycard said the change "gives you more flexibility with your monthly payment". It added that the move is designed "to ensure customers are treated as fairly as possible".

Martin Lewis: 'This under-the-radar change could DOUBLE the total cost of your debt' 

MSE founder Martin Lewis

Martin Lewis, founder of MoneySavingExpert.com, said: "This is a worryingly under-the-radar change by the UK's biggest credit card provider. Changing minimum repayments looks innocuous, even trivial – most customers will, I suspect, have ignored it.

"Yet this seemingly technical and bland change is a huge danger signal. I wish I could light up the sky with neon signs shouting that, for those unaware, if paying interest on their credit card debt, it can easily DOUBLE the total cost of debt by the time you clear what you owe, meaning you pay £100s or £1,000s more.

"Minimum repayments have always been credit card firms' secret weapon. Letting people repay little looks appealing – hence why Barclaycard says this is about 'flexibility'. Yet it takes flexibility to kick your own backside, and this will hurt some just as much.

"Barclaycard's reduction, for many, from 3.75% of the balance to 1% of the balance, means while people's repayments will cover their interest, they will clear far less of what they owe, prolonging the debt, keeping people indebted year after year after year, and the interest racking up year after year after year."

"I would urge ALL Barclaycard customers to sit up, take note of this, and check now if you only pay the minimums. If so, unless you've other, even costlier debt you're clearing first, if you can't afford to repay in full each month, try to make a FIXED monthly repayment based on what you can afford – even if it's the same amount as your current minimum – rather than letting your repayments decrease as you owe less.

"This can radically reduce the length you're in debt and the interest cost. The more you can repay, the less interest you'll be charged."

How Barclaycard's new minimum repayments compare

Regulator the Financial Conduct Authority (FCA) sets strict rules that all credit card providers have to follow, including around minimum repayments. In its consumer credit regulations handbook, the FCA states:

"...a firm must set the minimum required repayment under a regulated credit agreement for a credit card or a store card at an amount equal to at least that amount which repays the interest, fees and charges that have been applied to the customer's account, plus one percentage of the amount outstanding."

As shown in the tables above, Barclaycard's new formula is in line with this.

Barclaycard's approach is also in line with that of some other major credit card providers. For example, looking at our current top-pick 0% balance transfer cards, Santander's minimum is the higher of 1% of the balance plus interest or £5, while NatWest and Virgin Money also use 1% of the balance plus interest as one of their 'highest of' options.

Meanwhile, with Lloyds, the minimum is 2.5% of the balance plus interest or £5; and with HSBC, it's 2.5% of the balance, 1% of the balance plus interest, or £5 (whichever is higher).

Why you should pay a FIXED amount instead – and how to set this up

As with any debt, the aim should always be to repay it as quickly and cheaply as possible. But minimum repayments end up doing the opposite, because the lower your debt goes, the less you have to repay each month. This means you end up borrowing for longer and paying more interest as a result.

To stop that, simply make a fixed repayment each month based on what you can afford, rather than letting your repayments decrease each month. This could save you £1,000s and get you debt-free YEARS quicker. Going back to the example above:

Paying off a £1,000 Barclaycard debt – minimum repayment vs FIXED amount (i)

Paying NEW monthly minimum Paying a FIXED monthly amount of £29
How your repayment is calculated

On ALL Barclaycards, from 22 July 2024

The highest of:

- 1% of your balance

OR
 

- 1% of your balance plus interest

OR


- £5

N/A – you pay the same amount each month.

£29 is what the initial monthly minimum would be, so you'd simply need to keep this in place rather than letting it drop.

The more you can repay, the less it'll cost you in interest overall – use Barclaycard's repayment calculator to see how much more you could save.
Time it would take you to fully clear debt
19 years and three months Four years and eight months
Total interest you'd pay
£1,655 £620 (£1,035 less)

(i) Assuming an APR of 24.9% (the typical Platinum card rate) and that you don't spend any more on the card.

  • How to set up a fixed monthly repayment with Barclaycard

    You can set up a Direct Debit to pay a fixed amount each month online, via the Barclaycard app, in a Barclays branch or by contacting its customer services team.

    To set up a Direct Debit or edit an existing one online, follow these steps:

    • Log into your online Barclaycard account (if you don't have one, you'll need to register first).
    • Scroll down and select 'Set up a Direct Debit' from the home page.
    • Under "How much would you like to pay each month?", select the option labelled "This much" and enter the amount you want to pay each month.
    • Enter your bank account details and hit "Set up Direct Debit".

    To set up a Direct Debit or edit an existing one using the app, follow these steps:

    • Log into the Barclaycard app (available free on the Apple App Store and Google Play Store).
    • Select 'Your cards' from the home page.
    • Select 'Manage Direct Debit'.
    • Choose 'Other amount', enter the amount you want to pay each month and hit 'continue'.
    • Enter your bank account details, then follow the final steps to confirm.

    Alternatively, you could set up a Direct Debit for the minimum and then manually pay an affordable amount on top each month. See Barclaycard's website for instructions on how to do this.

    Of course, if you can afford to, it's best to pay your credit card off IN FULL each month – and avoid interest charges altogether. To do this, follow the steps above, but select the "Statement balance" option when you're asked to choose your monthly repayment amount.

    If you can't repay in full, it's worth checking if you can slash costs with a 0% balance transfer.

Got multiple debts? Prioritise paying off the one with the highest interest rate – which may be your overdraft

If you have debts on other accounts (such as credit cards, loans, overdrafts or buy now, pay later services), the lower monthly minimum repayments on your Barclaycard could help you direct the cash you have towards whichever of your debts is most expensive, which could get you debt-free quicker.

To work out which debt to prioritise, first look at your statements or online accounts and find the interest rates for each account – then list them in order. The one with the highest rate should be your priority, as that's the one growing most quickly. You may find this is your overdraft, as many high street banks charge around 40% for these.

Once you've found your priority debt, focus any spare cash you have on clearing it, paying just the minimum on the others. Then move on to the next most expensive, and so on.

What to do if you're struggling with debt

If you're struggling, you can find full help in our Debt crisis help guide, though first there are three questions you should ask yourself...

  • Do you struggle to meet minimum monthly payments?
  • Is your total debt (not mortgage/student loan) over one year's salary?
  • Do you have sleepless nights or depression/anxiety over debt?

If you answer 'yes' to any of these, the solutions in our guide may not be suitable, instead you should consider getting free, one-to-one debt-counselling help from CAP (which gives emotional support too), Citizens AdviceNational Debtline, or StepChange.

They're there to help, not judge. The most common thing we hear after is: "I finally got a good night's sleep". Just go for it, read inspiring stories in our Debt-free wannabe forum, and also see our Mental Health & Debt guide.

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