Martin Lewis warns ‘under radar change’ by UK credit card company could ‘double’ debt | Personal Finance | Finance

is warning Britons of an upcoming change soon to take effect for Barclaycard customers.

From July 22, Barclaycard will be reducing minimum monthly repayments, meaning people will be able to pay back less per month.

However, the founder described the change as “a huge danger signal” that could leave people paying back “double” the debt that they owe.

Mr Lewis 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.”

On most Barclaycards, including Avios, Platinum and Rewards, the current monthly minimum repayment is the highest out of 3.75 percent of the balance, 2.5 percent of the balance plus interest, or £5.

According to Money Saving Expert calculations, paying the minimum balance of a £1,000 debt would take nine years and eight months to clear, and would rack up £699 in interest.

However, the new rules to take effect in July for all Barclaycard customers will mean monthly repayments drop to the highest of one percent of the balance, one percent of the balance plus interest, or £5.

Using the same £1,000 debt sum, Money Saving Expert calculated that minimum repayments would take a customer a staggering 19 years and three months to pay back. The total interest payable would rise to £1,655.

These calculations are based on the assumption that the APR is 24.9 percent (the typical Platinum card rate) and that no more money is spent on the card.

Mr Lewis continued: “Barclaycard’s reduction, for many, from 3.75 percent of the balance to one percent of the balance, means while people’s repayments will cover their interest, they will clear far less of what they owe.”

He added that this will prolong the debt while interest racks up “year after year after year.”

The financial journalist then urged Barclaycard customers to check if they only repay the minimum amount. He said: “

“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.”

A Barclays spokesperson said: “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.”

All customers have been given 60 days’ notice of the changes and have the option to opt out and close at the current interest rates and minimum payment calculation.

If customers are unhappy with the changes, Barclaycard said it encourages them to get in touch.

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