Barclaycard's new debt trick

by Ed Bowsher on 11 September 2009  |  1 comment
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I dislike Barclaycard's new cashback offer on interest payments.

I sometimes think the expression 'credit card' is misleading. They should really be called 'get into debt' cards. The banks make money when we go into debt on our cards, and they often design cards to lure us into debt.

The new Barclaycard Cashback Credit Card is no exception.

In some ways, it's a great card as it enables you to get money back on your spending. You'll get 1% back on your first £2000 spend during the year, and then 0.5% on the next £18,000. Nothing wrong with that.

The bit I don't like is cashback on interest payments. At the end of the year, you'll receive back 10% of any interest payments you've had to pay for the card during that year.

The idea sounds good initially. You'll pay less interest on your credit card debt, right?

But I'm afraid I see it as a way to make debt seem less threatening to users. Then the users will accumulate more debt and Barclaycard will make more money.

Cashback on interest payments is a frequently used trick when it comes to personal loans. But I've never come it across before on a credit card. Introducing cashback on interest payments is a 'clever' innovation by Barclaycard, but it's not in the best interests of consumers.

I suspect the real story here is that Barclaycard is worried about the government's consultation on the regulation of credit cards.

This consultation could lead to a ban on negative payment hierarchy which is one of the banks' sneakiest tricks and also one of their biggest money-makers. The likes of Barclaycard know that they've got to come up with some new ideas if negative payment hierarchy is banned - cashback on interest may be the first of many.

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