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Barclaycard introduces higher minimum charges on credit cards

Forward, Platinum, Cashback, Freedom, Hilton Honors and Rewards credit card customers face higher minimum repayments

Barclaycard introduces higher minimum charges on credit cards

Millions of Barclaycard customers will see their minimum repayments rise from today (26 January), as the bank changes its charging structure.

In November last year, Barclaycard notified customers about the changes, included in its terms and conditions.

The changes include how the bank calculates minimum payments – the minimum you have to repay on your card each month, changes to the interest charged on cash transactions and a ban on card use for gambling.

The changes will be tailored to individual customers to help those in ‘persistent debt’.

Here, Which? explains what the changes could mean for you, how its charges compare with other banks and whether you should switch.

Barclaycard’s changes explained

From today (26 January), the minimum amount you pay will be personalised to you. 

The precise payments depend on the individual customer but will be the highest of the following three calculations: 

  • 2-5% of the main balance (plus any instalment plan payments) – this is individual to each customer; 
  • 1-3% of the main balance plus any interest, default fees or account maintenance (plus any instalment plan payments) – this is individual to each customer;
  • £5, or the total outstanding balance of an account if it is less than £5. 

Barclaycard has contacted customers and used an example of a balance of £2,500, with monthly repayments rising from £60.42 to £79.17 – an increase of 31%. 

This means some people could see the minimum repayment rise, although some other charges – such as the late payment fee – will be limited.

Why are the charges changing?

The changes to Barclaycard’s terms and conditions come in response to rules set by the Financial Conduct Authority (FCA) in 2018 aimed at helping borrowers in ‘persistent debt’

A borrower is classed as being in persistent debt if they are paying more in interest, fees and charges than the amount they are paying off their balances. 

The bank hasn’t specified how many credit card users are affected by the changes but said it will apply to ‘millions’ of customers.

The changes will affect those with Platinum, Initial, Freedom, Forward, Cashback, Littlewoods, Rewards and Hilton Honors cards, but not Premier or Woolwich cards.

What if I can’t afford the monthly repayments?

If you’re affected by the changes and can’t afford to pay, you may be able to get some help.

Banks have been offering support to customers during the coronavirus crisis via payment holidays.

You can contact Barclaycard to see if you can get any help via online banking, the app or by calling 0800 151 0900.

How does Barclaycard compare?

The table below shows the minimum monthly repayment plans for some of the major UK credit card providers.

The minimum payment on your credit card is normally set at the greater of a percentage of your balance or a cash amount (whichever is higher), for instance, 3% or a minimum of £5.

We used Moneyfacts to check what banks are charging their credit card customers. The results are in the table below.

Bank Min monthly repayment (%) Min monthly payment (£)
Metro Bank 5% £20
First Direct 3% £5
John Lewis Financial Services 3% £5
Bank of Scotland 2.50% £5
Royal Bank of Scotland  1% £5
NatWest 1% £5
HSBC 2.50% £5
Cooperative Bank 2% £5
Sainsbury’s Bank 2.25% £5
Tesco Bank 1% £25
TSB 1% £5
Halifax 2.50% £5
Lloyds Bank 2.50% £5
Virgin Money 1% £25
Santander 1% £5

Source: Moneyfacts

Many banks offer as little as 1% minimum repayments, or £5 per month such as Santander, Royal Bank of Scotland and NatWest, which may be lower than what you’d have to pay with Barclaycard, depending on the customer.

Should I transfer my debt to another provider?

You could consider transferring your debt to another provider, but make sure you research other features such as customer service before making the move.

Our analysis of the best and worst credit card providers could help you make your decision.

Transferring your balance means moving all or part of a debt from one credit card to another.  Most providers will allow you to do a balance transfer from another card for a one-off balance transfer fee so long as you have a big enough credit limit to cover it. 

However, there are a range of 0% balance transfer credit cards that offer a better deal if you have some serious debt to shift. If accepted, you’d pay no interest on your balance for a set period so more of your payments go towards clearing your balance, although minimum payments are still required.  Once your 0% period finishes, the interest rate will go up. Check if the final rate is competitive with other cards.

  • If you want to switch providers, visit Which? Money Compare. The tables allow you to search hundreds of credit cards to help you find the most suitable deal.

What other changes has Barclaycard made?

Barclaycard customers should be aware of other changes which have also come into effect.

Interest on cash transactions 

If you pay your main balance in full – plus any instalment plan payments due that month – you’ll no longer pay interest on sterling cash transactions (for example, when you take cash out with your card in the UK).  Otherwise, interest will continue to be charged from when the transaction is added to your account and will appear on your next statement.  

Credit limit fees 

Barclaycard will no longer charge a £12 over-credit-limit fee.  You’ll also no longer lose any promotional rates if you go over your credit limit or miss a minimum payment. However, if you do go over your credit limit or miss a minimum payment, your credit records may be affected, meaning it may be harder or more expensive for you to borrow in the future. 

Late payment fees 

You’ll only be charged late payment fees a maximum of four times a year. Late payment fees are currently £12 every time you miss a payment. This means the maximum you could pay a year in late payment fees won’t exceed £48 under the new rules. 

Gambling transactions 

Barclaycard will block any transactions made at a gambling establishment or on a gambling website, so if you try to use your card, it won’t go through.

How to clear your credit card debt

If you’re in persistent debt, or if you want to pay off any kind of long-standing credit card debt, it’s best to pay off more than the minimum amount each month. 

That’s because it’s much more expensive in the long run if you only make the minimum repayments as they usually only cover interest and fees. Only a really small amount actually goes towards clearing your debt. 

Furthermore, since minimum payments are charged as a percentage, they’ll shrink when your debt shrinks, meaning it will take you even longer to pay it off.

You can use our credit card repayment calculator to see what difference a fixed payment could make to your credit card balance. 

Debt charity StepChange offers free help and advice to those struggling with their finances. 

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of the credit card provider before committing to any financial products.

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a provider before committing to any financial products.

Categories: Credit cards & loans, Money

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