This week will see banking giant Barclays increase its minimum repayments for Barclaycard customers. Millions of people use the popular credit card, including many older customers who have been with the leading bank for many decades. However, the minimum repayment hike comes at a financially difficult time for many.
Barclays outlined the move to increase minimum repayments in November 2020 in a 'Changes to Your Terms and Conditions' notice. However, many may not have realised the notice's importance and may have failed to read the information. As such, the minimum repayment increase could come as a complete shock to some customers.
January is traditionally a tough month financially for many people. With many people still counting the cost of Christmas, it might be difficult for some to find extra money for unexpected expenses at this time of the year. In addition, more people are now using their credit cards, as some businesses are not accepting cash payments in the current situation with the pandemic.
Many are still experiencing huge financial issues due to the global pandemic, which has affected finances significantly. There are still a lot of working people furloughed on 80% of their wages. Many others have lost their jobs or seen their hours slashed as a result of Covid-19. This has left vast numbers of Barclaycard customers struggling, and the rate hike at this stage could make matters worse.
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Who is affected and what are the new rates?
According to information released by the bank, the new rates will affect a range of Barclaycard customers. This includes Platinum, Initial, Freedom, Forward, Cashback, Littlewoods, Rewards, and Hilton Honors card customers. However, the new rates will not apply to those with Woolwich and Premier cards.
Under the previous repayment terms, minimum repayments were worked out as 1% of the balance plus interest, 2.25% of the full balance, or £5.00 depending on which of these was highest. This has now changed to between 2-5% of the balance, 1-3% of the balance plus interest, or £5.00.
The bank has confirmed that they will work out the exact changes to rates on a case-by-case basis, so some may see their minimum repayment rates increase more than others. Also, the rates may be slightly different for customers who have been with Barclaycard for more than a decade.
There is some good news as part of the changes. Barclaycard is now scrapping charges for going over the credit limit. This will benefit customers who do go over their limit. However, for those who rarely if ever exceed the credit limit, it will make no difference.
Repaying debt more quickly
According to Barclaycard, the reason behind the hike is that they want cardholders to avoid getting into persistent debt. A spokesperson for the credit card giant said that the new rate structure would ensure cardholders paid off the card balance faster and paid less interest overall.
He said, "This is part of our ambition to ensure that no Barclaycard customer gets into persistent debt - where they pay more in interest and charges than reducing their debt and take a long time to pay this debt off - and is being put in place to support our customers."
However, some debt experts have said the new rate structure could create serious financial issues for those already struggling with their finances.