Barclaycard emailed customers in November 2020 about changes to their credit cards. With the title “Dear [customer name], we’re updating your T&Cs “, you may have ignored it.
But many people will find their minimum payments are going to be increasing from 26 January 2021. And some of the increases will be very large.
This affects Barclaycard holders with Cashback, Freedom, Forward, Platinum, Hilton Honors or Barclaycard Reward cards.
People with Premier, Barclays Infinite and Woolwich cards aren’t affected.
January! That’s always the worst month for many people’s finances, with Christmas spending coming through on the credit cards. Often wages are paid early in December as well, so January is always a long, tough month. And this year some families will be worse off because of the pandemic.
Some minimums going up between 22% and 67%
At the moment the higher your interest rate, the larger your minimum payment.
But from late January Barclaycard is applying an extra multiplier to this. They call this “personalisation” and it will increase some people’s minimums by a lot more than others
You will have to pay the higher of three numbers as your minimum:
- between 2 and 5% of your balance;
- between 1 and 3% of your balance, plus any interest, default fees or account maintenance;
- £5, or the total outstanding balance of an account if it is less than £5. (This £5 element hasn’t changed, it’s there to make sure people with very small balances clear them quickly.)
Your email gives the exact percentages Barclaycard has decided to use for your account. Here is what one customer in the middle of the range of increases was told:
Those numbers may all sound small, but they have a large effect on your monthly payments.
The email then uses a balance of £2,500 to demonstrate what the effect on your minimum payments is likely to be.
This shows what someone with the same interest rate as you pays at the moment on a balance of £2,500. And what this will go up to in January, using your new percentages.
Here are some examples, including the lowest and the highest that I have seen:
| min now | min Jan | increase |
| £57 | £69 | 22% |
| £62 | £80 | 30% |
| £60 | £79 | 31% |
| £69 | £94 | 36% |
| £79 | £117 | 47% |
| £82 | £132 | 61% |
So with the same balance, at the moment the minimums range from £57 to £82 – the largest charge is about 50% more than the lowest charge. This will be changing to that the range is £69 to £132 – some people will be paying 90% more than others.
And it is the people with the highest interest rates that are being asked to pay these very large increases. People paying a low rate of interest will only see a small increase in the minimum.
“I don’t have that email any more!”
If you have deleted the email not thinking it was important, or it went automatically into your junk folder, you need to find out whether you will be affected and by how much.
Barclaycard give the full changes for all the affected cards here. But to find the exact rates that will be applied to you, you need to log into your account, as that page explains.
Why Barclaycard is doing this
They aren’t doing it to make more money from you – although that is what it may feel like!
Your interest rate is staying the same, they are just making you pay back your balance quicker… this will get you out of debt sooner and means you will overtime pay less interest.
That is good for people who can afford it.
Barclaycard hasn’t said why it is doing this, but it seems likely they are trying to reduce the risk in their credit card lending. Since the pandemic started, they have also been reducing many people’s credit limits.
Increasing the minimum payments will also stop people getting trapped in persistent credit card debt.
Three problems with these Barclycard minimum increases
Increasing minimum payments is a good idea in general.
Minimums used to be much higher than they are now, see Credit card minimum payments – developments from 2000 to 2019 for details. By cutting the minimums, lenders have made it harder for many people to clear their credit card debt resulting in them paying more interest. So higher minimums are broadly a good thing.
But I see three big problems with what Barclaycard is doing:
- Sudden large increases don’t give time to plan and adjust. It would have been much better to set out a program of increasing minimums gradually over a period of one to two years so borrowers weren’t hit by very large jumps at very short notice.
- By increasing the minimums most for the people who are most likely to have financial problems, Barclaycard is turning debt that was manageable if expensive into problem debt for a lot of customers.
- Hiding the announcement in an email about “T&Cs”. This just isn’t responsible. When you are making a big change that can affect many customers you need to be very open about it.
What to do if you can afford the higher payments
If you can manage to pay the higher amounts, then paying the larger amounts is going to get you out of debt sooner:
- people paying interest will save money over the years;
- if you have a 0% deal, your balance will be lower at the end of the deal, which is good as it is proving harder to refinance 0% deals that are ending.
But this may not be what you wanted to spend extra money on in January…
You have the option to reject the new minimums and stop using the account. In this case, you can’t use the card any more but you can carry on paying it off at the old minimum rates.
With an excellent credit record you could look at getting a 0% deal with a different lender, although other lenders may later decide to increase their minimums too. With a not great credit record, this isn’t an option for you.
What if you can’t pay the higher minimum?
When the new minimums are too high to be affordable, what you should do depends on how bad your financial situation is. I’ve made up some cases here, so see if one of them sounds like your situation.
Reject the change and close the account
A simple option is to reject the changes. The email from Barclaycard says:
If you feel that some of the changes we’re making aren’t right for you, you can choose to close your account. Please do this before 11 January 2021.
I don’t think that date of 11 January will be enforced. If you phone them up when you get your bill at the end of the January and say you didn’t know the minimums were going to increase, I think Barclaycard will probably allow you to close the account and stay at the old level. If they refuse, then complain to the Financial Ombudsman!
If you close the account, you can’t use your card any more but you don’t have to repay the whole balance immediately. You can carry on paying the old lower minimum payments.
This does mean that you are going to be paying a lot of interest for a long while, so although this is an easy choice to make now, it could be expensive in the long run. So it’s worth seeing if you have better options.
“I was fine before – my only problem is this Barclaycard change!”
You could try phoning up Barclaycard and objecting. I don’t know how likely this is to work. Barclaycard told MSE that the increase won’t be applied if there would be “significantly large increase”… but there is no explanation of how big an increase would count as “significantly large”.
“I’ve got a lot of debt problems but they are temporary because of Covid-19”
Barclaycard told MSE that people won’t have these higher charges if they have had to take a Cornovirus payment holiday. If you can explain that you haven’t had to ask for a payment break so far but your finances have been affected by Covid-19, then Barclaycard may agree to not increase your payments.
Another option is to actually ask for a Cornonavirus payment break now if you haven’t had 6 months breaks on the Barclaycard already. Then you could pay a lower amount, or nothing, for a period. Interest still accrues, so your balance will be going up but this break may get you through a few bad months.
“My Barclaycard debt is much too high”
Sometimes it takes a change like this new announcement to make you sit back and realise that your Barclaycard debt is just huge in relation to your income. It has grown over the years as your credit limit has been increased and now you wonder how that much was ever considered to be affordable.
I suggest you read Can you get refunds from catalogues and credit cards? which looks at how to make an affordability complaint that your credit limit was increased too high. If you win that, you may have some interest refunded which will reduce your balance.
But these complaints can take many months as the lenders often say No so they have to go to the Financial Ombudsman. Easy to do but not speedy…
So making an affordability complaint won’t solve your immediate problem in January. In addition to the affordability complaint, you probably have to choose between closing the account and asking Barclaycard for a payment arrangement. A payment arrangement will get interest frozen on the debt. It will harm your credit record but it may still be much your best option.
“I’ve got a lot of debt problems, Barclaycard is just one of them”
In this case the Barclaycard higher minimums may just be the last straw. Here it’s best to get help sooner rather than later.
If you try to struggle through, paying the higher minimums by borrowing more money, your problem gets even bigger next month, especially if you borrow at high interest rates.
Instead talk to a debt adviser. Phone National Debtline on 0808 808 4000 – they can help you look at all your options.
Options when you cant pay bills & debts
Is the interest rate on your card going up?
“Halifax cut my rate but now I must pay more”
Chantal Smith says
118 money did this from October and increased the minimum payment from about 28 per month to 42 and worded their letter the same. A change in the terms and conditions to your agreement.
Sara (Debt Camel) says
“28 per month to 4” – did you mean 40?
Sara (Debt Camel) says
thanks. So a 50% increase.
I do think it’s sneaky putting these changes out and calling them T&C changes.
Chantal Smith says
Yeah. I do also and unfortunately unless you have money to pay off the debt and close the account there is unfortunately nothing you can do. As i complained straight away and said this will mean I’ll struggle with other commitments I now have but that was what they came back with.
Sara (Debt Camel) says
You don’t have to pay off the debt! You can simply say you want to reject the new T7Cs and close the account, but you can then carry on and repay the balance more slowly.
If they didn’t make that clear to you, you can go back now and say this is the option you want.
Chantal Smith says
That’s interesting because they said I have to pay my credit card off and can close the account if I didn’t want to accept the new conditions and I decided this would leave me without a credit card with ant funds on so I decided not to close it.
Sara (Debt Camel) says
So to be clear. Your options are the same as those for people with Barclaycards:
– You can pay the higher minimums and carry on using the card.
– Or you can reject the new T&Cs and have the account closed, but then you can repay the balance at the old lower minimums.
If you want to carry on using the card then you have to pay the higher minimums.
But 118 this is an expensive bad credit card. And you have also had a lot of payday loans. It might be best to talk to a debt adviser about your options?
Chantal Smith says
So to be clear I had to settle the debt and close the account, but they didn’t advise what amount or accept the new terms and conditions and carry on using my account and pay £42 per month minimum payment.
This was their email in October.
Dear Chantal,
We refer to your credit card agreement with 118 118 Money dated 18/06/2020 (as modified or varied from time to time) and with card number ending 4626 (the “Agreement”). As a responsible lender, we take new rules and regulations introduced by the Financial Conduct Authority seriously. Earlier this year the FCA released new guidance on how lenders should support their credit card customers in avoiding long-term debt. An example of long term debt would be if you only make minimum payments or low payments on your 118 118 Credit Card. This would mean you’re probably paying more in subscription fees than what you have borrowed and under the new rules your account would be considered to be in ‘persistent debt’. To help prevent this, we will be varying your Agreement to change how your contractual monthly Minimum Payment (as defined in the Agreement) is calculated and charged.
The Variation set out in this Notice will be effective from 08/10/2020. You do not need to do anything else for this change to take effect.
Changes to your Agreement
We have made changes to your Agreement and your credit card Account in accordance with Conditions 10 and 11.2 of the Agreement. The changes we are making to your Agreement are as follows
Sara (Debt Camel) says
ok so this is part of the persistent Credit Card debt handling. But they still can’t insist you repay the balance in full if the account is closed. You can just carry on repaying the balance.
Chantal Smith says
OK. Thanks Sara. That’s very helpful. I don’t know what to do then, because if you close an account but still have debt doesn’t it effect your credit score?
Sara (Debt Camel) says
That is complicated, it depends on your overall utilisation. But does your credit score matter that much? If you have a 118 card it’s probably pretty poor anyway.
Em says
Reading this makes me glad I went into an IVA 3yrs ago. My minimum with them was about £210 per month and a shift like this would have left me in negative figures each month. I was just getting by with a crazy amount of debt (and stress!) Each month I was lucky if I had £50 left after repaying minimum payments only. I remember reading about these changes coming in not long after the IVA and wondering how I would have coped. I hope anyone who finds this article because they are searching these changes is able to find peace of mind from debts, I know too well how much headspace it takes especially at Christmas when you feel you need to buy gifts for people.
Sara (Debt Camel) says
I think these changes will make a lot more people look at their debt options.
An IVA can sometimes be a useful option for people who have a house with equity or other assets to protect and who have a stable job and family situation. But 30% of IVAs fail…
Most people who have debts that are impossible to repay even if interest is frozen will be much better off looking at a Debt Relief Order or Bankruptcy.
IVAs are being mis-sold to many people as the firms make large fees from them :(
James says
So it is just changing for some people with a Barclaycard cashback card?
I emailed Barclaycard today and they said there are no changes for me regarding minimum payments.
They did say my 19.6% cash interest rate(which I do not use) is going down to be in line with my standard interest rate of 9.9%, it is higher than some of my cards which are 6.7% though.
So it seems the better credit score you have the lower the interest rate you get as I presume such people are less risk?
Sara (Debt Camel) says
Do you know what the name of your card is? Premier, Barclays Infinite and Woolwich cards aren’t affected.
Yes good credit scores tend to mean you get a lower interest rate.
James says
Sara
It is called a Barclaycard Cashback visa credit card, there is no mention of the words ‘Premier, infinite” etc.
Chantal Smith says
I’ve just been building it up after completion of my IVA last year and I need to get a new mortgage next year. So when I took out a lot of my current credit last year and earlier this year its all been based on a score of 230 to 250 max. I’m now at 320-560 depending on which one I check and found I am getting better rates now than last year. I didn’t really want to undo what I’ve worked so hard to build up for the last 18 months.
Sara (Debt Camel) says
For a mortgage though you really need to get your credit card utilisation down. If you can pay more than the minimum that is the best way.
paul says
I have just realised, that whilst I pay Barcalycard the minimum amount by direct debit every month – my balance still goes up slightly each month as the interest payment is more than my minimum payment.
Barclaycard closed the account several years ago and I am continuing to pay the balance down.
Is this normal?
Sara (Debt Camel) says
why did Barclaycard close the account?
There was a change in the regulator’s rules in 2011 – after that date all new credit card accounts must have a minimum payment that is larger than the interest charged. But banks didn’t have to do this with existing accounts. Was you account aopened before 2011?
That still doesn’t mean it’s fair for them to do this, even if it doesn’t break that particular rule…
Has Barclaycard ever warned you about your balance going up?
Have you had any letters from them about “persistent credit card debt” in the last two years?
paul says
oh trying to remember as it must have been 7 or 8 years ago.
If i recall, they said I didn’t meet there criteria or something anymore so whilst the account was closed – I could still make the payments every month and it shows on my credit file as though its a active amount with credit limit and payments.
The account was opened in 1999.
To be honest, I left the minimum payment going as I had credit problems before so wanted my account to still look as though it was running currently as it was my oldest credit account and didn’t want it too show as behind or anything.
I did have a standard looking letter before Christmas about persistent debt, but I only understood about the minimum payment part – not that they were charging me more interest than i was paying every month.
So there’s nothing I can do except pay off asap?
Sara (Debt Camel) says
I think you have a very good reason to complain, because you haven’t been treated fairly.
I think you should say (assuming this all correct – don’t exaggerate things in a complaint!):
“You closed my account several years ago, but said I could just carry on repaying it, so I left the account to be repaid by the monthly direct debit. I had assumed that my debt was being reduced, I never checked my statements as I wasn’t using the card so didn’t realise I had to.
I have now discovered that all this time my balance has been increasing as you have set my minimum payment below the interest you charge. I had no idea this could happen – I assumed the minimum payment had to be more than the interest you charged.
I have been told that as my account was opened before 2011, setting the minimum payment at this level is not actually in breach of the FCA regulations.
However it does not appear to me to be fair that you have allowed this to continue for years without alerting me to the problem.
CONC 6.7.3A says that a credit card lender should monitor a customer’s repayment record and take appropriate action where there are signs of actual or possible financial difficulties. Why did it not occur to you that a consistently increasing balance over a very long period was a problem?
I had a persistent credit card debt letter before Christmas, but that just said it would take a long while to clear the balance, not that it was actually increasing each month.
If I had been informed about this, I could have taken action earlier and saved a lot of interest.
I suggest to remedy this, that you should refund me half of the interest that you have added to my account since it was closed. I will then set up a standing order to repay the remaining balance at the amount of my recent direct debit, which will enable me to clear the account faster.”
If they refuse, I suggest you send your complaint to the Ombudsman. I would be interested to know how this goes.
paul wynn says
No solid updates as yet – I did write a letter to Barclaycard and waiting for a reply.
Mind you today, I received a computer generated letter – persistent debt it says and giving me a couple of options to pay down.
Albert says
I agree with the general aim of increasing minimums so people can clear debt faster,” says Sara Williams, yet other companies such as aqua New Day while taking booster payments are offering money transfers for 6 months @0% thereby keeping the customers in debt and increasing interest at the end of the six months to 49% surely that is in breach of the booster payments demanded by the FCA
Sara (Debt Camel) says
The FCA is only saying that firms have to take action when a credit card customer has been in “persistent debt” for 36 months.
Persistent debt is when a customer has paid more in interest and charges then they have paid off the capital amount borrowed over a period.
By increasing miniums generally or encouraging customers to pay a higher boosted rate, a lender makes it LESS likely the customer will end up in persistent debt, and the customer will pay less interest over time as a result.
This doesn’t have anything to do with whether a lender offers a 0% offer at the start. I would agree that a very short 0% offer offer with a high interest rate at the end isn’t a good idea – is this a trap you have walked into?