Barclaycard flexibility hides a steely attitude

Debt counsellors and credit-card data providers lined up last week to praise Barclaycard for its new Flexi-Rate card, which goes on sale tomorrow. I think they have been a bit premature with their plaudits.

The new card charges a different interest rate according to how much of your bill you pay off each month. The bigger the repayment, the less you pay in interest. For example if you pay 10 per cent of the outstanding balance, you pay a rate of 9.9 per cent APR, but if you pay just 5 per cent of your balance, you pay 12.9 per cent APR.

The Consumer Credit Counselling Service (CCCS) - the debt counselling charity - welcomed the move as an encouragement to cardholders to reduce their debts.

'The problems of people we help arise substantially from penalties and charges and the card industry has been careering towards a socially dangerous situation in which a smaller number of people, badly organised or financially damaged, are paying the bill for the rest of the community,' it said. 'In this context Barclaycard's new initiative ... represents a more intelligent approach by lenders which offers consumers a helpful choice.'

I agree that anything that gets people to reduce their debts is a good thing. But before rushing to apply for the Flexi-Rate card, consider these two points. Barclays already offers a long-term low-rate card - Barclaycard Simplicity - which charges a typical APR of 6.9 per cent APR. Barclaycard says this is only available to those with 'excellently good' credit records, but other credit card companies offer similar rates. Surely it makes more sense to pay as low a rate as possible, however much you are repaying each month?

Secondly, Barclaycard is resisting calls by the Office of Fair Trading to cut its £20 default fees for customers who fail to pay their monthly bill on time. Exactly the problem highlighted by the CCCS, and hardly the sympathetic response you'd expect from an 'intelligent' lender.