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Barclaycard says Flexi-Rate offering prompts customers to pay back more

UK issuer Barclaycard says that research shows its Flexi-Rate customers are repaying credit card balances more quickly, reducing both the time taken to repay and the amount of interest they pay.

Flexi-Rate was launched in October 2005 and Barclaycard has analyzed repayment behavior over the past seven months. The figures show that, compared to a standard card, half as many customers are habitually making only the minimum payment. Furthermore, the proportion of customers choosing to repay more than the minimum each month has risen by 10%.

Changing repayment behavior saves money, for example, a customer borrowing GBP1,000 on a credit card (at 15.9% APR) and repaying just the minimum each month would take 21 years and three months to repay, and pay GBP1,400 in interest. The same GBP1,000 borrowed on Flexi-Rate and repaid at 10% per month would take four years and six months and cost GBP110 in interest, a saving of GBP1,290, the card issuer said in a statement.

Barclaycard Flexi-Rate charges a lower interest rate to those customers who pay off a higher proportion of their balance. Customers who pay more than 10% of their monthly balance are charged an interest rate of 9.9%, those who pay more than 5% are charged 12.9%. Customers who opt to pay less than 5% (minimum 2%) are charged 16.9%.