MARTIN Lewis has explained why Barclaycard’s minimum repayment hikes could be good and bad news for the millions of Brits having to pay back more each month.
A raft of Barclaycard customers will see their minimum credit card repayments rise from today in a move the bank says will help those in “persistent debt”.
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Persistent debt is when you pay more in charges and interest than your actual repayments, making it difficult to pay off what you owe.
Customers with 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.
The payments hike could be a good and bad thing for Barclaycard holders, the MoneySavingExpert founder said on his The Martin Lewis Money Show Live on ITV last night.
Although he said minimum payments could rise up to 50 per cent, paying back more each month could be “bad news” because this will hit your cash flow.
If you’re struggling to pay back the money or you can’t afford the payment changes, Martin advised customers to speak to Barclaycard.
“I’m not saying that they will do anything, but they may be able to,” he said.
But paying back more each month could also be “good news”, Martin said.
This is because you will ultimately pay less in interest and clear your debt quicker.
“In general, I would always try and pay more than the minimum payment otherwise you pay a lot in interest,” Martin said.
However, this is unless you’ve got another debt that’s more expensive, in which case Martin advised customers to just pay the minimum repayment on their Barclaycard and pay as much as you can back on your other debt.
The rise in Barclaycard minimum payments comes following tougher regulation introduced in February last year, as 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.
What to do if you’re struggling to meet your Barclaycard repayments
IF you can’t afford paying back more each month as part of Barclaycard’s minimum repayment hikes, here’s a number of things you can do:
Move your debts
If customers are unhappy with the changes, they could move their debts to another provider, Rachel Springall, finance expert of comparison site Moneyfacts, told The Sun.
But “not everyone will be in a position to do so,” she added.
If you’re looking to do this, TSB’s minimum repayment on its Platinum balance transfer credit card is currently the highest of 1% or £5, for example.
Speak to Barclaycard
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.
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.”
Consider a personal loan
If interest charges are eating up most of your monthly card payment, you should consider a personal loan to repay your card with fixed monthly repayments over a term that’s affordable to you, personal finance expert Andrew Hagger of Moneycomms told The Sun.
“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.”
As part of the changes in place from today, 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”.
But the minimum fee hike comes at a time when finances are already stretched due to the coronavirus crisis and Christmas.
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