Last November, Barclaycard signalled to customers in a change to its terms and conditions that it was changing the way minimum payments would work. Barclaycard says this is to help avoid Barclaycard customers being in persistent debt, helping them to pay less interest and reduce how long it takes to pay the debt back. The change takes effect tomorrow.
They also said late payment fees will be limited to a maximum of four per year (though late payments will be recorded on your credit report so are best avoided), with charges for being over the limit and cash withdrawals (though only if you pay back in full within the month) scrapped, as well as banning the use of the card for gambling.
So far, sounds so good in a bid to help customers avoid difficulties, though the timing could be better given Christmas, a longer period between paydays and the current situation with furlough and loss of income affecting many.
If you’re a Barclaycard customer, the exact nature of the change will have been outlined in the communication in November with illustrations of what it means for you.
Previously, you would have been required to pay the higher of 2.25% of your balance, or 1% plus interest, 0.1% plus interest for pre 2010 customers, or £5.
You will now need to pay between 2% and 5% of your balance, excluding any instalment plan payments, or 1-3% of your balance or £5 if it’s low.
First and foremost, don’t panic. It is true that you must meet legal minimum repayments to avoid defaulting on your credit card. Remember, it’s a good thing to pay over the minimum, if you can afford it. If you can’t, it’s important to take a look at how to do so.
If you are worried about meeting repayments, take a good look at your finances so that you can work out how much you can afford and whether you can make changes to other payments elsewhere without missing them or paying late. So, if you are over-paying on a more expensive debt (which is also a good thing to do), you may need to rebalance your payments in the short term to meet your new minimum.
You could also look at how to restructure your debt, from whether you are eligible to switch to another card with better terms, to a consolidation loan. But don’t jump straight in. Take a little time to understand the terms of any other products and what it means not just to your short-term issues of meeting payments, but also the long-term cost of your debt. Don’t forget to check for other options using ‘soft searches’, or quote searches, so that you are more confident you will be accepted before you take the plunge. This is important as lots of hard searches can negatively affect your ability to get credit.
Barclaycard promised in November that this should not result in a significantly large increase to your minimum and has asked that if you think this change will make your payments difficult to meet, you get in touch with them to discuss it further. So, if you cannot find ways to afford the new minimums, don’t bury your head in the sand. The best thing will always be to talk to your creditors before anything gets out of hand as they may be able to provide some temporary relief while you get things in order.
If you're concerned about your finances or are struggling with debt, the organisations on our Debt Helplines page can offer you additional support or advice.
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