New credit card rewards fast repayment

11.06.2006 Paying off credit card balances quickly can save money. In the following example, you can see how much money can be saved by paying above the minimum repayment value.

A customer who borrows £1000 with interest at a rate of 15.9% and only makes the minimum repayments , will take 21 years and three months to repay their debt. In the meanwhile, they will have paid an extra £1400 in interest. Effectively the consumer has paid twice the original amount, for the privilege of borrowing. If, however, the customer had paid 10% of their balance each month, it would only take them 4 years and 6 months to repay the debt and cost them £110 in interest.
Barclays have launched a new credit card, which has tapped into the value of fast repayments. The Barclays Flexi-Rate card rewards card holders for repaying debts faster. It has a changeable rate of interest, whereby the more you pay of your monthly balance, the lower the interest, and so the less debt you accrue.
Using this card, customers who pay more than 10% of their monthly balance will be charged interest at a rate of 9.9%, customers paying more than 5%, are charged 12.9% and customers paying less than 5% (but above the minimum of 2%) are charged 16.9%. By altering the rate of interest like this, the card encourages holders to repay their debt more quickly and become more efficient with their account handling.
Since launching the card, Barclays have analysed repayment behaviour, and results have shown the number of people who repay more than the minimum on their balances each month, has risen by 10%.