Barclaycard holders to have interest rate linked to base rate
Towards the end of last year, Barclaycard announced that from 1 February 2016, it would link interest rates to the Bank of England (BOE) base rate.
As the BOE base rate has been held at a historic low of 0.5% since March 2009, a comparison site warns that the 10.5 million Barclaycard customers will forget about the change and once it does move upwards, interest charges would also rise.
Mark Carney, the BOE governor did previously warn that an interest rate hike could come in early 2016, though he has also hinted that rate rises could be as far away as next year.
‘An easy cash cow for credit card providers’
Hannah Maundrell, editor in chief of money.co.uk, said: “With the base rate unlikely to move for at least another year I suspect the majority of Barclaycard’s customers will ‘sit on their hands’ from 1 February as the policy change will not cost them a penny for quite some time.
“My concern is that people will forget about this change until the base rate starts to move. At this point, many of those in the red could see their interest charges creep up – although apparently some will pay less. In reality, a 0.25% base rate increase would cost customers with a £1,000 balance an extra 21p in interest each month according to Barclaycard.
“Although, for Barclaycard, this is a move that will likely pay off in time. This is an easy cash cow for credit card providers and I suspect this will become the norm rather than the exception across the industry.”
She adds that customers paying interest on their credit card should take the move as a prompt to check whether they can cut costs by making a balance transfer.