Barclaycard and loan in one

Barclaycard is experimenting with combining a credit card with a personal loan in a bid to save consumers money.

The new product, Barclaycard Combinations, has been designed to cost less and see loans paid off faster, the company has said today.

Under the new product, people pay for things on their credit card in the normal way, and three times a year they can move money from their card balance into a separate loan "pot" with lower interest rates and the option of a fixed repayment term.

Money can be moved from the card balance to the loan over the phone.

Any money then paid off on the product goes to the more expensive credit card debt first, and then onto the loan balance.

Customers receive an itemised bill as usual, with the minimum payment fixed at three per cent of the card balance plus the loan repayment.

"This is a new idea which we believe offers a fair deal, encourages responsible borrowing and addresses some of the criticisms that have been levelled at the credit card market," said Keith Coulter, Barclaycard's managing director for cards and loans.

Barclaycard has written to 100,000 of its customers to tell them about the new offer, which has an interest rate of 9.9 per cent APR for the credit card and 6.9 per cent for the loan.

"Response from customers during research has been very positive but ultimately, of course, they will decide what's right for them by choosing to apply or not. We will be watching the results of the test with great interest," noted Mr Coulter.

However, the product has not been met with universal acclaim.

Personal finance website uSwitch.com pointed out that there are better interest rates available in the marketplace for both credit cards and personal loans.

James Curan, product manager at uSwitch, explained that less disciplined consumers would find Barclaycard Combinations a simple way to consolidate debts - but for consumers willing to spend some time there were better value deals available.

"Certainly the product is innovative, but not groundbreaking. You have credit cards offering interest rates under seven per cent and loans are available under six per cent," he said.