What is persistent debt?
The Financial Conduct Authority (FCA) has created some rules to help people avoid taking on more debt than they can afford. 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 credit card payments 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
This example shows the difference between only paying the minimum each month, which slowly reduces over time as you pay off your balance, 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.
Being in persistent debt 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 card.
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 card 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 do nothing. 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 card 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 card.
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.
The FCA have introduced rules which mean we're required to 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 card 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 you 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 offer you a repayment plan to pay down your balance in 48 months. We may also need to block your card so you'll be unable to make additional spend.
If we think it will help you, we might send a few more reminders and suggestions in between these letters.
Things like paying late or missing payments will affect your credit score. Being in persistent debt 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 credit card bill could save you a significant amount of money, so it's important that we keep reminding you of your options.
If paying more each monthly simply isn't possible, please don't do nothing. We don't want you to owe an amount you'll struggle to repay, and there are options we can talk you through if you contact us.
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).
Or if you'd prefer you can speak someone independent: