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5th May 2024
12:48pm BST
Martin Lewis has issued a warning to anyone who banks with Barclays.
The financial expert spoke out after Barclays reduced their minimum monthly repayments for certain customers.
“We wanted to let you know that we’re changing the way we work out your minimum payment on your Barclaycard from 22 July 2024," the bank's email read.
"This means the minimum amount you pay each month will go down. We’re making these changes to give you greater flexibility over how much you pay each month.”
Around 80% of those who bank with Barclays will see their minimum monthly repayments decrease.
However, Martin Lewis has warned the public that this isn't as good as it may first seem.
“Minimum repayments have always been credit card firms’ secret weapon. Letting people repay little looks appealing – hence why Barclaycard says this is about ‘flexibility’. Yet it takes flexibility to kick your own backside, and this will hurt some just as much," he said, via The Independent.
“Barclaycard’s reduction, for many, from 3.75% of the balance to 1% of the balance – means while people’s repayments will cover their interest, they will clear far less of what they owe, prolonging the debt, keeping people indebted year after year after year, and the interest racking up year after year after year.”
Lewis' website, MoneySavingExpert.com, calculated that, with a Platinum card interest rate and £1000 of debt, it could take nearly 20 years and £1,655 of interest to pay off the debt if paying the new minimum.
Before the changes, this would have taken just under ten years with £699 being paid in interest.
“I would urge all Barclaycard customers to sit up, take note of this, and check now if you only pay the minimums," Lewis said.
“If so, unless you’ve other, even costlier debt you’re clearing first, if you can’t afford to repay in full each month, try to make a fixed monthly repayment based on what you can afford – even if it’s the same amount as your current minimum – rather than letting your repayments decrease as you owe less.
“This can radically reduce the length you’re in debt and the interest cost. The more you can repay, the less interest you’ll be charged.”
A Barclays spokesperson said of the new system: “We regularly review our products and from July, some Barclaycard customers will see changes to their minimum monthly payments, alongside adjustments to the APR.
“Customers will benefit from a reduction in their minimum monthly repayment and the vast majority have no change to APR, while some will receive a decrease.”
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Featured image credit: Money Bright/Flickr
