It may be cold outside, but inside financially, things are about to get heated up!

In bid to help people survive the economic downturn, Barclaycard is to cut its credit card rates for up to three million of its customers over the next year.

Speaking on behalf of Barclaycards, Antony Jenkins said: “We recognise that 2009 is going to be a difficult year for many people and want to do what we can, when we can, to help our customers.”

Barclaycard acts as the nation’s largest credit card provider and stated that it will cut interest rates for over a quarter of its clients by between 2.5% to 5%. Half of these customers will have their rate slashed by the end of February, while the rest will follow throughout the year.

The company has also reduced the rate on its elite Barclaycard Platinum product and Barclaycard OnePulse for new customers from 2.5% up to 12.4%.

This move by the firm was prompted by a decline in its own borrowing costs, which it aims to pass on to its card users, rather than a rise in customer’s evasion. Barclays added that its lower borrowing costs came from cost reductions within the banking group.

Chief executive Antony Jenkins commented: “We recognise that 2009 is going to be a difficult year for many people and we want to do what we can, when we can, to help Barclaycard's customers.”

New Year means a New Step

This brave new step is a significant move away from the negative reputation other credit card firms hold.

In 2008, Egg controversially cut off 160,000 of its customers, allegedly because they were not earning the company enough money. It then followed the rest of the financial market by hiking its rates.

 A recent poll revealed that over a fifth of credit card holders said they had their credit card rate increased by 8% over the past year.

Peter Harrison, a credit card expert said: “Barclaycard has always been an innovator with credit cards. It has the largest stable of cards suited to the widest range of customers – and it has again shown market leadership here by becoming the first major provider to come out with such a commitment.”

Harrison added: “In an environment of falling mortgage and savings rates, card providers had been strangely quiet until now. A copycat commitment from other providers would be most welcome.”

Michelle Slade followed the praise: “Barclaycard is one of the biggest names in credit cards and it is a welcome move that they are leading by example and not only freezing customers' interest rates, but in some instances reducing them. “

Barclaycard’s move follows an announcement this week that it also plans to offer borrowers a two-and-half-year break from their credit card debts if they opt to pay an extra charge on their spending.

It also has to be acknowledged that the new proposal carries favour with the government, which stated late last year that credit card consumers must be treated fairly.

Following a consultation in 2008, credit card firms now have to give consumers in financial difficulty a breathing space of two months in order to seek independent debt help. During this time, the interest rate is frozen.