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Credit card could help manage debt

Thu, 20 Oct 2005

A new credit card is due to be launched, and the credit card provider hopes it could help people manage their debt more sensibly.

It is believed that Baclaycard's new Flexi-Rate credit card will help people repay their credit card balances quicker, reducing the interest added to their credit card balance.

Some 60 per cent of people will repay their credit card balances faster with this new card, according to research conducted by the University of Warwick.

This is because the interest rate charged on balances for this credit card is reduced for those who repay a higher proportion of their balances.

Credit card customers repaying ten per cent or more of their credit card balance a month will be charged 9.9 per cent. Those repaying the 2.5 per cent minimum will be subjected to an interest rate of 16.9 per cent.

Interest rates are only "half the story", says Keith Coulter, managing director of Barclaycard UK cards and loans, adding that the speed of repayment has a "huge bearing" on the cost of credit.

He believes the new credit card recognises that both the credit card provider and the credit card holder have an "equal commitment" to the responsible management of debt.

"For some customers – particularly those that revolve a balance - Flexi-Rate would be a much better option than, for example, zero per cent offers where customers automatically pay higher rates following the offer period," added researcher Professor Henry Stott of the University of Warwick.

He believes because people would start repaying more each month, they will develop a "more sustainable, long-term attitude" to debt management.

The new credit card will be available from October 24th.

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