Possible issue with barclaycard - please check your bills

Ignatius_A

I just recently received my barclaycard bill

It confirmed that they have changed the way they calculate their minimum payment - and mine has gone down from over £100 to just over £10

Great, I thought, all my debt on Barclays is at 6.9% or less - i'll reduce my minimum payment and use the rest on the other card i'm trying to pay down at the moment.

Only problem is, on examining my statement in more detail, I find that whilst my minimum payment is £10.xx, my estimated interest for next month is £23.xx This effectively means that if I pay the minumum payment every month, I'm actually going to get MORE into debt on that card - and I'm willing to bet that that debt will be at the standard APR of the card (19.9%) rather than at the balance transfer rate. Very nice for Barclays, I'm sure, but not a position I intend to let myself fall into.

Then I thought of all the people on here who are doing the same (paying down credit cards), but have (maybe) set up Direct Debits for the minimum payment - it's going to be very easy to fall into this trap completely unawares, believing that your minimum payment is at least covering your interest payments.

The answer is quite easy - ask barclays to set your DD to a FIXED amount per month which exceeds your estimated interest (I personally use a standing order - it keeps me in control, but does require me to keep a closer eye on things)

Hope this help someone avoid a potentially costly situation.

jamesd

Best to ask Barclaycard about the rate for the interest. If it is at the deal rate it's a good way for some to get more money free to overpay other debts, increasing the amount at the cheaper Barclaycard rate.

Moggles_2

I'm willing to bet that that debt will be at the standard APR of the card (19.9%) rather than at the balance transfer rate.

If you have a life-of-balance deal, the existing transactions should still be charged at 6.9% APR until the balance is paid off.

'Best not to assume anything though.
If you ring Barclaycard Card Services on 0800 9177 277, you'll avoid the perishing 0870/0844 numbers

Ignatius_A

Moggles wrote: »

If you have a life-of-balance deal, the existing transactions should still be charged at 6.9% APR until the balance is paid off.

'Best not to assume anything though.
If you ring Barclaycard Card Services on 0800 9177 277, you'll avoid the perishing 0870/0844 numbers

The existing debt should continue at the same rate, I agree. My concern is that the INTEREST on the existing debt, which is not covered by the reduced monthly minimum payment will be viewed as a new transaction.

(e.g. I pay min payment £10, new transactions (interest) = £23, leaving £13 new transaction still on the account)

Due to the hierarcy in which most credit card vendors pay off debts, the lowest rate debts (balance transfer) would always be paid off in preference to the higher rate debts (accumulated unpaid interest) leaving the latter sitting at the higher rate until all of the balance transfer is paid off.

Thanks for the number. I'll probably give them a ring and get it from the horse's mouth.

Ignatius_A

Just an update for anyone interested.

I called Barclaycard today to query the details

Providing I understood the eastern gentleman properly, and that he also understood me, it appears that one of my suppositions above was incorrect.

1) It is true that my minimum payment is less than my interest accrued - which means that if I had a direct debit set to cover the minimum payment, my debt would now be starting to increase.

2) I was informed that if the base debt is at 6.9% (as in my case) then the interest on the account would be added to the part of the balance on which the interest is charged, so that if you have multiple balance transfers on your account at different rates then the interest on that portion is added to each separate arrangement such that

A) First balance transfer 500 at 6.9% - interest on the unpaid interest is at 6.9%
second balance tranfer 1000 at 5.9% - interest on the unpaid interest is at 5.9%
C) Spending 1000 (if you were so silly) at 19.9% - interest on the unpaid interest is at 19.9%

(existing rules will apply - incoming cash will be applied to the lowest rate balance first - leaving the 19.9% as an ever increasing portion of the debt)

This still means that those who have a DD set up to pay the minimum payment will have increasing credit card balances and will incur more compounded interest every month.

Lesson for today - BEWARE MINIMUM PAYMENTS - even more so with barclaycard under their new rules

Regards

Moggles_2

Thanks for your feedback. 'Glad the number still works.

jamesd

That's excellent news for anyone dealing with debts.

The best thing for most people clearing debts to do is make only the minimum Barclaycard payment until they only have the Barclaycard and 0% balance transfer debt left. Just need to ensure that you don't go over the card limit.

Barclaycard does report whether you're making only the minimum payment and that can make it look as though you're having financial trouble. Setting up a standing order for a penny or Pound will take care of that.

Setting up a fixed payment higher than the minimum would be a bad idea because it would just increase the time to become debt free.