Barclaycard cuts minimum payments

Friday, 26 June 2009 10:00

Barclaycard is cutting its minimum payments on its credit card for some of its customers.

The lender is lowering the minimum payment to 1.5 per cent - which could increase the life and amount of a debt for those sticking to minimum payments.

Campaigners have hit out at the move, stating the fall in minimum payments from 2.25 per cent to 1.5 per cent - or £5 -means debts will last longer.

Making minimum repayments on a £5,000 debt of 1.5 per cent on an interest rate of 15.9 per cent will result in £22,300 of interest paid over 98 years.

At the higher level of 2.25 per cent, the debt would be cleared in 31 years.

The advice remains to make repayments over the minimum.

Martin Lewis, creator of moneysavingexpert.com, said: "Minimum repayments are sheer genius for card companies as they get to look generous by 'cutting costs' when they're actually keeping customers perpetually in debt."

He added: "The clever part is that as the amount you owe reduces, so does the amount you repay, meaning most people are barely covering the interest that accrues, and hardly eating into the amount owed at all."

A spokesperson for Barclaycard explained customers could opt out and there "have never been restrictions on paying more".

"We make it very clear in statements and highlight in bold if you only make minimum payments it will take longer to pay off and you will pay more," he said.

"The advice is always to pay more than the minimum."

He added the move was aimed at helping those struggling in the current economic environment.

He added most Barclaycard customers do not stick to minimum repayments and the general pattern of use was for cardholders to clear debts built up over Christmas or for summer holidays over a few months.

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