Barclaycard makes costly reduction in minimum payments

by Gill Montia

Story link: Barclaycard makes costly reduction in minimum payments

Barclaycard is reducing its minimum monthly payment from 2.25% of card balance to 1.5%, or a minimum of £5.

While the news could come as a relief to some customers it means that a £5,000 debt could take 98 years to clear, costing many thousands of pounds in interest.

According to MoneySavingExpert.com a £5,000 Barclaycard balance with interest charged at 15.9% annual percentage rate takes 31 years to settle under the current 2.25% minimum repayment conditions.

Such a loan would involve interest charges of £5,900.

However, the consumer website point out that with a minimum repayment of 1.5%, the repayment period extends to 98 years and interest charges escalate to £22,300.

The UK’s largest credit card provider would therefore pocket an additional £16,400 in return for more “generous” terms.

Barclaycard says the offer is for selected customers only and that it makes the dangers of only ever making the minimum repayment very clear.

In related news, the Citizens Advice Bureau recently reported that debt issues produced the biggest volume of enquiries during the year to the end of March, with advice given on 1.93 million new cases, an 11% rise on a year earlier.

Clients with debt problems owed an average £16,971, which the charity calculates would take 93 years to clear if repaid at an affordable level.