The bank said that more than a quarter of the 4,400 jobs at Barclaycard would be cut to improve efficiency by introducing advanced computer systems designed to enhance customer service.
Northampton, where Barclays issued the UK's first credit cards in 1966, will suffer 400 job losses, while Barclaycard's 70-strong Birmingham branch is likely to close completely. Other jobs will be lost at Kirkby, Manchester and Teesside.
Bob Potts, chief executive of Barclaycard, said he "very much regretted" the job cuts. But he insisted it was necessary to ward off aggressive competition from new entrants, many of them American banks seeking to penetrate the European market.
"We have a strong business but we cannot afford to ignore the tough competition. We need to make the changes while we are doing well. This will enable us to introduce them over a reasonable period of time," he said.
The bank has been warning unions of the need for job cuts for 18 months. But staff were still shocked at the scale of the cutbacks. Susan Hamilton- Smith, national officer of Unifi, the finance union at Barclays, said: "Staff have been aware for some time that jobs may be on the line, but this is really bad news."
Mr Potts said he was "very aware that many employees will be extremely concerned at the news they've heard today", but refused to rule out compulsory redundancies. He said staff would be treated with dignity and helped to find new jobs.
The cuts go hand-in-hand with a pounds 30m investment in new technology designed to automate basic functions such as allocating a credit limit to new customers. Barclays Bank, which gets 12.5 per cent of its profits from Barclaycard, has already spent pounds 100m installing a new computer system.
Barclaycard remains the most popular UK credit card, with 9.4 million cards in issue, but in recent years its market share has dipped below 30 per cent. It has felt increasingly threatened by US card companies wanting to establish themselves in the UK as a springboard to move into the rest of Europe.
Low-cost US operations such as MBNA and Household Finance Corporation have already succeeded in issuing more than a million cards each by mail- shotting customers and advertising lower rates of interest.
An explosion of "affinity cards" has disrupted the effective marketing of credit cards. The Star Trek Fan Club, Peugeot, Sainsbury's and the Elvis Presley Fan Club are just four groups offering their own product. Bells and whistles have been added such as rebates on gas and electricity, money off on Ford cars, and cheaper mobile phone charges.
But while Barclays said the job cuts were driven by competition, it resisted suggestions that it would cut its annual percentage rate - one of the highest at 22.9 per cent. Shares in Barclays rose ahead of the market from 1063 to 1090p.
Outlook, page 19