Martin Lewis issues an urgent warning to all Barclaycard customers

Martin Lewis has issued a warning to Barclaycard customers who could be in debt for significantly longer due to a minimum repayments shake-up.

From July 22, Barclaycard is reducing minimum monthly payment requirements for some customers.

An email from the bank read: “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. 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 customers are expected to see their repayments decrease or stay the same based on how they currently use their card.

Repayments will be calculated based on whichever is highest of 1% of the customer’s main balance; 1% of the customer’s main balance plus any interest, default fees or account maintenance fees; or the customer’s total outstanding balance, if it is less than £5.

Mr Lewis said: “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.

“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.”

A calculation by MoneySavingExpert.com, based on £1,000 of Barclaycard debt, and assuming a typical Platinum card interest rate, indicated that by only paying the minimum, someone could potentially take around 19 years and three months to clear their debt and pay around £ 1,655 in interest, under the new system.

Under the previous system, they may have potentially taken around nine years and eight months and paid around £699 in interest by paying the minimum.

The calculation was based on several Barclaycard types, which under the current minimum payments system ensure people pay the highest of 3.75% of the balance; 2.5% of the balance plus interest; or £5.

Mr Lewis added: “I would urge all Barclaycard customers to sit up, take note of this, and check now if you only pay the minimums.

“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.”

Barclays said the changes are designed to ensure that it continues to treat customers fairly and deliver positive outcomes for all, with a more targeted, flexible payment plan alongside ongoing support for those with persistent debt.

A spokesperson said: “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 will have no change to APR, while some will receive a decrease.”