What is persistent debt?
To help customers avoid taking on more debt than they can afford, the Financial Conduct Authority, or FCA, has created some rules to help people's accounts get out of persistent debt. On this page, we've explained everything you need to know about it, and what we can do to support you.
What the FCA means by persistent debt
If your repayments have been going more towards paying interest, fees and charges than off your balance for 18 months or more, the FCA calls this persistent debt. As part of the rules, we'll get in touch to explain what your credit card is costing you and what you should do next.
Paying more than the minimum each month reduces the interest you'll pay
Your minimum payment is worked out using a % of your balance plus interest, fees and charges. This will then slowly reduce over time as your balance is paid off - provided that you haven’t made any further purchases, transfers, cash advances or incurred any fees or charges.
If you can afford to, fix your repayments to more than the minimum or make extra payments now and then to make sure your account gets out of persistent debt. Paying more than the minimum every month can make a big difference – you’ll pay off your balance quicker and save on interest. It could also improve your credit score.
This example shows the difference between only paying the minimum % each month and fixing your payment at the same amount each month:
The figures are based on a £3,000 balance and assume you don’t continue to use your card for purchases, transfers or cash advances, incur fees or charges and that the 24% effective rate per annum doesn't change. The minimum payment has been worked out using 1% of the £3,000 balance plus interest, fees and charges.
See the difference repaying more can make
A small change like fixing your monthly repayments can make a big difference, and help you clear your balance sooner and pay less interest.
Add your current balance, interest rate (Annual Effective Rate %, or AER) and an amount you can afford each month to our budgeting tool to see the interest you could save, and how quickly you’ll clear your balance if you set up a fixed monthly payment. You can find your current balance and interest rate on your most recent statement.
Number of months to pay off
Total interest paid
When your account is in persistent debt, it means you've been paying more in interest, fees and charges than off your balance for 18 months or more. This is an expensive way to borrow as it can cost you hundreds of pounds in interest and means you are taking a long time to pay off your balance.
When you've been paying more in interest, fees and charges for 18 months or more we'll get in touch to let you know that you're paying back your balance in an expensive way. We'll explain your options and offer support if you need any extra help.
Pay more than the minimum each month if you can.
This means you'll:
- Pay less overall,
- Clear your balance quicker.
Ways to pay more than the minimum You can either set up a regular payment for any amount above the minimum, or pay the minimum and add top-up payments when you can
If you can't afford to pay more each month, please don't worry. Keep paying what you can and get in touch so we can help.
At the moment, your minimum payment is a % of your balance, plus any interest, fees and charges. The minimum payment you need to pay will appear on your statement each month. Details of how this is calculated is also included in your statement.
Occasionally paying the minimum can be helpful if your finances are squeezed, then you can pay off more of your balance when things improve. But if you only pay the minimum every month, you'll end up paying more interest and fees than you could have because the interest adds up. It'll also take a long time to pay off your balance.
So, it's really important that you take some time to work out what you can afford to pay and get a regular payment set up, or talk to us if paying more isn't an option.
Extra cardholder's don't have overall responsibility for the credit card account, so we'll only write to the main cardholder about this.
We’ll write to you:
- If you've paid more in interest, fees and charges than off your balance for 18 months or more. We'll explain that paying just the minimum is costing you more in the long run, and how you can change your payment to save money and pay off your balance quicker.
- 9 months after that, we'll check in to let you know how things are going. We'll tell you if you're on track to paying more off your balance than in interest and charges. Or, we'll suggest a few more changes and explain what happens next to help your account come out of persistent debt.
- After the next 9 months, we hope by this point we're saying that you're in a better financial position than when we first got in touch. If you're still paying more in interest, fees and charges than off your balance, we'll let you know how much to repay each month so you can clear your balance in around four years and pay less interest. We may also stop your credit card.
- If we think it will help you, we might send a few more reminders and suggestions in between these letters.
If your account has been in persistent debt for three years, we’ll start giving you Recommended Payment Amounts in your statement. Paying these every month will help you clear your persistent debt balance over a reasonable period of time, for example four years.
The Recommended Payment Amount in your statement includes your minimum payment and any missed payments you owe. So please check it every month before you pay it as it may change depending on how you manage your account.
If you can afford to, paying this amount will help you clear your persistent debt balance over a reasonable period of time. This means you’ll pay back what you owe quicker and it could cost you less interest.
If you’re struggling, please don’t worry. Get in touch with us and we can talk through your options. Unless you’re on a payment holiday, you need to keep paying at least your minimum payments to make sure you don’t miss any payments.
No, you don’t need to make any payments, while you’re on a payment holiday. But try to make payments when you can afford to, as paying even a small amount each month during your payment holiday will help to lower your balance more quickly. You can find ways to make payments on the back of your statements.
We’ll remind you when your payment holiday is due to end. When it does, you need to start making your payments again and if we’ve given you a Recommended Payment Amount you need to keep making these payments each month so you can keep using your card.
If your account has been in persistent debt for three years, we’ll write to you about paying a Recommended Payment Amount each month so you can pay back your persistent debt balance in around four years. If you’re not able to pay these, or if your financial circumstances or repayment behaviour changes, we may stop your card to help you pay back your balance over a reasonable period of time. This will help keep your balance down and prevent you going further into debt. If we do this, we’ll write to you to let you know.
If we’ve stopped your card and you need this for essential living expenses, please call us so we can help.
Things like paying late or missing payments will affect your credit score. If your account is in persistent debt it won't directly change your score, but paying more than the minimum can help to keep your credit score healthy in case you need to borrow in future.
We'll keep writing to you to try and help. Changing the way you pay off your balance could save you money, so it's important that we keep reminding you of your options.
We’ll write to you with a recommended repayment amount each month, so you can repay your balance in around four years, paying less interest overall.
If you can't afford the recommended payment amount, please call us to talk through your options.
If you prefer, you can get free, independent help from one of these services:
We do understand that talking about money isn't easy. If you contact us, we can explain all your options and help you to find a way forward.
You can speak to us on 03456 062 062 (Mon-Thur 9am - 8pm, Fri 9am - 6pm, Sat 9am - 1pm).
If you'd prefer, you can get free, independent advice from one of these services: