Persistent debt and what you need to know about it

What is persistent debt?

Have you been making minimum repayments on your credit card for over a year? If so, you might have recently received a letter from your bank about something called persistent debt.

You might not have heard of persistent debt before, which is understandable; it’s a relatively new term. The FCA (Financial Conduct Authority) introduced it in early 2018 as a category for people who’ve been paying more in interest and charges than their credit card’s actual balance for a period of at least 18 months.

If this sounds like you, chances are your card provider has written to you asking you to increase your minimum credit card payments, or even increased your payments to them themselves. This has been done to protect credit card users from paying high amounts of interest over a long period of time, and to prevent people from falling into long-term debt.

Your creditors aren’t just trying to get more money out of you, or trying to force you to pay an amount you can’t afford so they get their money back quicker. Rather, they’re acting on the FCA rules mentioned above so they can help you to not waste your money on interest and charges, and to stop you from falling into debt in the future.

Why is my credit card provider asking me to increase my minimum payments?

Your monthly minimum credit card payment includes two things: an amount you pay off your credit card’s balance and an amount for interest and charges.

Every time you make a repayment on your credit card you’ll be paying for both of these. By making the minimum payment you’ll mainly be paying interest and charges, and only a tiny amount off your actual balance. This means that by making more, smaller payments over a longer period of time, you’ll be paying much more in interest and charges because of how long it’s going to take you to clear your balance. Doing so for 18 months will mean that you’ll be classed as being in persistent debt.

If you fall into the category of being in persistent debt, your card provider has to write to you notifying you of this. As well as asking you if you can increase your minimum repayments, they have to make you aware of other payment options that are available to you and let you know what can happen if you don’t increase the amount you’re paying.

Man checking his finances

What can I do about persistent debt?

The best thing you can do if you’re in persistent debt is to increase the amount you’re paying each month.

For example, if you make the minimum repayments on a card with £5,000 balance and an interest rate of 18.9% APR, it could take you 31 years and 10 months to pay off your balance. Not only is this an extremely long time to pay off a credit card of £5,000, you’ll have also paid a massive amount in interest over the 31 years.

By increasing your payments to a fixed amount of £150 per month, you’ll have paid the card off in three years and 10 months – and paid a lot less in interest and charges along the way.

Stop spending on your card

Another thing that you can do if you’re in persistent debt is to stop spending money on your credit card. This will see your credit card’s balance go down quicker, getting you out of persistent debt faster and reducing the amount you’ll pay in interest and charges.

Speak to your credit card provider

Your creditors might be willing to suspend the interest and charges on your credit card if you’re in persistent debt. It’s up to them how long they’ll be happy to do this for, but if they do, it means all the money you were previously paying in interest and charges can go towards getting your balance down instead.

Consider switching credit cards

Switching credit card providers might see you get a better deal somewhere else. You could move your persistent debt balance to a different credit card company who charge you less in interest and charges, but be sure to let your current provider know you’re considering doing this; they might improve the deal they’re giving you if they know you’re thinking about switching.

But what if I can’t afford higher credit card payments?

Sometimes it can be hard to increase your payments, especially if you’ve got a lot of essential costs going out of your account every month. However, if you’re in persistent debt then it really will benefit you if you can increase your monthly repayment, even if it’s only by a small amount.

Check out our guides on how to reduce your spending and maximise your income – you might be surprised about how much you can save on your bills and benefit from making more of your money. We’ve also got a downloadable budgeting planner that you can use if you’re unsure where your money’s going every month; it’ll help you identify areas where you can cut down too.

Changing your repayment date

It might be the case that you can’t afford to increase your credit card payment because it’s taken out at the end of the month when you don’t have much of your wages left. One way around this is to simply change your repayment date to the start of the month (or just after you’ve been paid, whatever part of the month that is) so you don’t leave yourself struggling.

One-off payments

If you can’t afford to increase your regular payments, one thing you could do to get your balance paid off quicker is make one-off additional payments every now and again. Doing this allows you to work on getting your balance down safely without committing to paying an increased amount you might not be able to afford consistently.

One example of this would be overtime at work. If you get busier periods where you might work an extra 20 hours a month and have a bit more money than usual, you can put some of it towards paying off your credit card’s balance.

Remember, though, that making one-off payments doesn’t mean you don’t have to make your monthly minimum repayment; you’ll still need to do this regardless of whether you make a one-off payment of £5 or £300.

Can I check how long it’ll take to pay off my card?

Yes, you can. Barclays have a really easy-to-use payment calculator that’ll show you exactly how long it’ll take you to pay off your credit card if you keep up with your current payments, plus how much quicker you could pay it off if you increase your payments.

Will my card be suspended if I don’t start paying more?

If you don’t increase your minimum payments whatsoever then yes, there is a chance that your card provider will suspend your credit card. They will only do this if they feel that you aren’t making any effort to get out of persistent debt (i.e ignoring their letters and not making any payment increases or one-off payments) and feel that suspending your card is the only way to stop you paying any more in interest and charges.

Here’s how they’ll go about contacting you.

After 18 months of persistent debt

As mentioned above, this is the first time your card provider will contact you about persistent debt. They’ll do this because you’re paying more in fees, interest and charges than you are off your account’s actual balance for at least 18 months. They’ll either ask you to increase your minimum payment or notify you that they’re increasing your minimum payment.

9 months after writing to you

If you’re still in persistent debt 9 months after first contacting you about it, your card provider will write to you again. If they haven’t increased their minimum repayment amount themselves, they’ll talk about why it’ll be beneficial for you and encourage you to do so, as well as mentioning any other options that are available to you.

Further 9 months after writing to you

Your card provider will write to you for a third time regarding persistent debt if you still haven’t increased your minimum repayments. This time, they’ll either increase your minimum payment themselves (if they haven’t already done so) or suspend your credit card. This will negatively affect your credit rating and make it harder to obtain credit in the future, so you should try to find a way to increase your payments long before it gets to this point.

Can I get help with credit card debts?

If you’re worried about credit card debt and want to talk to someone confidentially, we’re waiting to take your call. Our helpline team speak to thousands of people in various levels of debt every year, and you can always count on a kind, compassionate and understanding ear when you speak to one of our debt advice specialists.

Why not call us for a chat on 0800 280 2816? Our offices are open from 8am to 8pm Monday to Friday, and 9am to 3pm on Saturdays. Alternatively, you can use our online debt solution tool, PlanFinder, to get a personalised debt solution to suit your circumstances.