Barclaycard customers to see minimum credit card payments rise from tomorrow

MILLIONS of Barclaycard users will see their minimum credit card repayments rise from tomorrow, January 26.

The changes, which were first announced in November, will be tailored to individual customers to help those in "persistent debt".

Persistent debt is when you pay more in charges and interest than your actual repayments, making it difficult to pay off what you owe.

Platinum, Initial, Freedom, Forward, Cashback, Littlewoods, Rewards and Hilton Honors cards will be affected by the changes, but not those with Premier or Woolwich cards.

Currently, cardholders' minimum repayments are calculated as the highest of 2.25% of the full balance, 1% of the balance plus interest, or £5.

The new charges mean minimum repayments will be the highest of between 2% and 5% of the full balance, between 1% and 3% of the balance plus interest, or £5.

How to cut the cost of your debt

IF you’re in large amounts of debt it can be really worrying. Here are some tips from Citizens Advice on how you can take action.

Check your bank balance on a regular basis – knowing your spending patterns is the first step to managing your money

Work out your budget – by writing down your income and taking away your essential bills such as food and transport
If you have money left over, plan in advance what else you’ll spend or save. If you don’t, look at ways to cut your costs

Pay off more than the minimum – If you’ve got credit card debts aim to pay off more than the minimum amount on your credit card each month to bring down your bill quicker

Pay your most expensive credit card sooner – If you have more than one credit card and can’t pay them off in full each month, prioritise the most expensive card (the one with the highest interest rate)

Prioritise your debts – If you’ve got several debts and you can’t afford to pay them all it’s important to prioritise them

Your rent, mortgage, council tax and energy bills should be paid first because the consequences can be more serious if you don't pay

Get advice – If you’re struggling to pay your debts month after month it’s important you get advice as soon as possible, before they build up even further

Groups like Citizens Advice and National Debtline can help you prioritise and negotiate with your creditors to offer you more affordable repayment plans

For example, a customer with an annual percentage rate (APR) of 18.9%, a balance of £2,500 and a new repayment rate of 3% will pay £79.17 each month under the new rules – up from £60.42 currently.

But the changes will make you pay off your debts quicker, meaning you'll save cash on interest over the long run.

Tougher regulation introduced in February 2020 means lenders have to do more to help those in long-term debt repay it.

As part of the Financial Conduct Authority's (FCA) shake-up, banks have been encouraging credit card users who only make minimum repayments to increase them over a 36-month period.

However, Barclaycard's minimum fee hike comes at a time when finances are already stretched due to the coronavirus crisis and Christmas.

If you've not been able to raise your repayments, your bank could reduce, waive or cancel any interest, fees or charges.

If you're struggling, we explain what options you have below.

Barclaycard said the increases have been capped for each customer if they make the repayments unaffordable, but it couldn't give a concrete cap.

It also couldn't specify how many credit card users are affected by the changes, but said it'll apply to "millions" of customers.

As part of tomorrow's changes, Barclaycard will now also only charge £12 late payment fees four times a year – compared to every month previously.

Plus, it'll remove the £12 fee charged every time a customer exceeded their credit limit.

A Barclaycard spokesperson told The Sun the changes are part of its aim to "achieve positive outcomes for its customers".

I can't afford the new repayments, what options do I have?

Although the changes are an aim to encourage borrowers to get out of persistent debt, they "couldn't come at a worse time", Rachel Springall, finance expert of comparison site Moneyfacts, told The Sun.

She added: "January is typically a tight month as it is, with many consumers being paid early in December it can be a stretch to afford unexpected outgoings before the next pay day. "

"If customers are unhappy with the changes they could of course move their debts to another provider, but not everyone will be in a position to do so."

For example, TSB's minimum repayment on its Platinum balance transfer credit card is currently the highest of 1% or £5.

Alternatively, customers will be charged the total of any interest, default fees and charges plus 1% of the outstanding balance.

Mrs Springall added: "If anyone is struggling they would be wise to contact a debt advice service and if they feel they are going to be unable to keep up their repayments, speak to their credit card provider immediately."

If you can't increase your repayments, your bank must offer a way to repay your balance over a reasonable period.

This is usually between three and four years and may involve transferring the credit card balance to a lower-interest personal loan.

While personal finance expert Andrew Hagger of Moneycomms told The Sun: "Although it may not feel that way, asking people to make slightly larger minimum payments does have benefits."

If interest charges are eating up most of your monthly card payment, youshould consider a personal loan to repay your card with fixed monthly repayments over a term that's affordable to you, he added.

Mr Hagger said: "If you do switch your card debt to a loan make sure you destroy your card and close the account – it removes the temptation of splurging on your plastic again.

"If you have severe financial issues – pick up the phone and speak to your card provider.

"They may be able to suspend interest for a period while you get back on your feet – just don't bury your head in the sand as it will only make matters worse."

A few weeks ago, Sainsbury's Bank unveiled a top balance transfer card with an interest-free period of up to 29 months.

We explain how to use your credit card if you’ve been financially affected by Covid-19.

Meanwhile, payment holidays for credit card and personal loan customers have been extended by six months.

Source: Read Full Article