Barclaycard has announced major changes to its terms and conditions that could impact the amount credit card customers have to pay each month, starting January 26, 2021.
The changes include the way the bank calculates minimum payments – the minimum you have to pay back to your card each month, changes to the interest charged on cash transactions, and a ban on using the card for gambling. silver.
Barclaycard did not say how many customers could see their payments increase, or by how much. But he says he’ll use the higher of the three calculations to work out the refunds, which will be individual for the customer.
Here, which one? takes a closer look at the changes and explains what your rights are if you can’t afford to pay.
Why are the changes being made?
The changes to Barclaycard’s terms and conditions follow rules set by the Financial Conduct Authority (FCA) in 2018 to help borrowers with “persistent debt”.
A borrower is classified as persistent in debt if they pay more interest, fees, and charges than the amount they pay out of their balance.
Under the rules set by the FCA, banks are forced to send letters to customers in debt for 18 months, warning them of the cycle in which they find themselves. Then 18 months later – so after three years in total – credit card providers must offer customers a method of paying off their balance within a reasonable time frame.
As of February 2020, lenders can freeze credit cards and set up repayment plans for borrowers with debt who do not repay more than the monthly minimum, although the FCA wrote to the banks urging them to consider other measures to help clients settle their debt.
Barclaycard says he wants to ensure that customers pay off their balances faster and avoid lingering debt and that the changes shouldn’t affect your interest in any way that over time you pay less.
How could the minimum monthly charges increase?
From January 26, the minimum amount to pay will be personalized.
If you are a Barclaycard customer, the bank should have already contacted you to tell you what you should pay from next year.
The exact payouts are dependent on the individual customer but will be the greater of the following three calculations:
- 2-5% of the principal balance (plus any installment payments) – this is individual for each client;
- 1-3% of the principal balance plus interest, default charges or account maintenance (plus installment payments) – this is individual for each client;
- £ 5, or the total outstanding balance of an account if it is less than £ 5.
Barclaycard reached out to customers and used a sample balance of £ 2,500, with monthly repayments dropping from £ 60.42 to £ 79.17, a 31% increase.
– ernmander (@ernmander) November 9, 2020
However, Barclays says most customers are already paying more than the minimum amount, so they won’t see any change.
It also says it will exclude those who, based on their current balances, would face a significant increase in their minimum repayments. Meanwhile, those who are financially vulnerable, such as those who may have taken a payment holiday, will be exempt.
This includes clients for whom a payment holiday has ended and they have resumed repaying.
Changes apply to Forward, Platinum, Cashback, Freedom, Hilton Honors and Rewards credit cards. They do not apply to Premier, Barclays Infinite and Woolwich cards.
What other changes are introduced?
Barclaycard customers should be informed of the other changes which will also come into effect from January 26, 2021.
Interest on cash transactions
As it is, you would have to pay interest on cash transactions in pounds sterling. Starting in January, if you pay off your entire principal balance – plus any installment payments due that month – you will no longer pay interest on cash transactions in pounds sterling (for example, when you withdraw from cash). money with your UK card).
Otherwise, interest will continue to be charged from the time 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 will also no longer lose any promotional rates if you exceed your credit limit or miss a minimum payment.
However, if you go over your credit limit or miss a minimum payment, your credit records may be affected, which means it may be more difficult or costly for you to borrow in the future.
Late payment fees
From January, you will only be charged a late fee four times a year.
The late payment fee is currently £ 12 each time you miss a payment. This means that the maximum you could pay per year in late payment fees will not exceed £ 48 under the new rules.
From January 26, 2021, Barclaycard will block all transactions made at a gambling establishment or gambling website, so if you try to use your card it will not pass.
What if I can’t afford to repay?
If you are affected by the changes and cannot afford to pay, you may be able to get help.
Banks have offered support to customers during the coronavirus crisis.
The FCA has established proposals extend payment holidays on credit products up to six months. You can contact Barclaycard to see if you can get help through online banking, the app or by calling 0800 151 0900.
How to erase your credit card debt
If you are persistently in debt or want to pay off long standing credit card debt, it is best to pay off more than the minimum amount each month.
This is because it is much more expensive in the long run if you just do the minimum reimbursements as they usually only cover interest and fees. Only a very small amount is actually used to pay off your debt. Plus, because minimum payments are charged as a percentage, they will decrease as your debt goes down, meaning it will take you even longer to pay it off.
You can use our credit card refund calculator to see what difference a fixed payment could make to your credit card balance.
You can also request a credit card with interest-free balance transfer. If accepted, you won’t pay any interest on your balance for a set period of time, so more of your payments will go towards clearing your balance, although minimum payments are still required.
If you’re unable to meet minimum repayments, consider seeking help. Debt charity Stage change offers free help and advice to people struggling with their finances.