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Last Updated: Saturday, 24 September 2005, 13:34 GMT 14:34 UK
Barclaycard fast payment 'reward'
Customers can choose how quickly they pay off their balances
A Barclaycard which aims to reward people with lower interest rates if they pay off their balance quickly is being tested.

Repayment Rewards is the second product from the firm this year which it says fosters a sensible approach to credit.

The card ties the interest rate charged on purchase balances to the percentage of the balance repaid each month.

Comparison website Money Supermarket said it was "gimmicky and complicated" and that a 0% deal was a better one.

Barclaycard is keen to promote itself as a responsible lender. Speaking to BBC Radio 4's Money Box programme, Barclaycard's Ian Barber said:

The programme was broadcast on Saturday at 1204 BST, and was repeated on Sunday at 2102 BST
"We carry warnings on all our statements that if you only make the minimum payment each month, that debt is going to stay around for much longer."

But the Repayment Rewards card has still allowed people to pay as little as 2.5%, despite its claim of encouraging a responsible approach to borrowing.

If a Barclaycard Repayment Reward customer with a 1000 debt paid the minimum repayment of 2.5% each month, with an APR of 16.9%, they would end up paying 950 in interest.

However, if the customer paid 10% of their balance each month, with an APR of 9.9%, they would they would pay just 150 interest.

'Customer choice'

The programme asked Mr Barber why Barclaycard did not only allow people to pay off larger amounts, rewarding them with the lower interest rates.

Mr Barber responded by saying: "What we are balancing is the flexibility of the card versus putting strict rules in place.

"We do make it increasingly clear about both the downside of making a small payment and the upside of making a larger payment, but ultimately the choice has to be with the customer.

This is simply a gimmicky and complicated card with an enticing name
Richard Mason, Money Supermarket
"The more rules and regulations we put in place around how you must repay, the less point there is in having a credit card. You might as well go and get a loan or a mortgage if you want a more rigid way of borrowing."

Commenting on the new product, Richard Mason of price comparison website Money Supermarket said the card offered "little real reward".

"This is simply a gimmicky and complicated card with an enticing name," he said.

"With the lowest APR set at 9.9%... consumers would be better off opting for the Halifax One card which offers 0% APR for balance transfers for 12 months and 12.9% APR thereafter."

And he said that with more than 45 0% cards for balance transfers still available there is little reason to ever pay interest.

No launch date for the Repayments Rewards product has yet been confirmed, although Barclaycard is aiming to make the product more widely available by the end of the year.

Barclaycard Repayment Rewards
Percentage of balance repaid in a month Purchase interest two statements later
2.5% (minimum repayment) 16.9%*
5.05% - 9.99% of balance 12.9%*
10%+ of balance 9.9%*
*Example rates quoted reflect those used in trial to date
Source: Barclaycard

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