What you need to know about persistent debt and how you can reduce the cost of your credit.
What is persistent debt?
The Financial Conduct Authorities (FCA) defines persistent debt as when you are paying more in interest, fees and charges than you are paying off your credit or store card balance, over a period of 18 months or longer.
Essentially this means, without increasing your payments, it could take several years and cost you more in interest and charges before you’ll repay your balance.
Persistent debt applies to credit or store cards because your payments can be relatively flexible.
We’ll get in touch to let you know if we think you’re in persistent debt and give you practical advice to help you move forward.
How to reduce the cost of your credit card
How paying more can make a difference
Below is a simplified example, based on a balance of £3,000 with an effective interest rate of 24%.
Total paid: £8,214
Total paid: £4,866
Total paid: £3,981
This example assumes that you don’t use your credit card, no additional fees or charges are incurred, and the interest rate doesn’t change. The minimum payment is calculated at 1% of the outstanding balance, plus standard interest, fees and charges.
More about minimum payments.
Free independent help and advice
There are also a number of organisations who offer support with money worries.
Persistent debt FAQs
We'll write to you:
- If you've paid more towards interest, fees and charges than on repaying your credit card balance, for 18 months or more. This letter will include information and tips on repaying your balance sooner to cut your borrowing costs.
- 9 months after that, we’ll let you know if you’re on track and are paying more off your balance than in interest, fees and charges. If not, we’ll explain what to do and what happens next.
- If you're still paying more in interest, fees and charges than off your balance at 36 months, we'll let you know how much to repay each month.
We may send reminders and suggestions in between, if we think it might help you.
Any action we take is aimed at helping you to cut your borrowing costs and repay your balance more quickly.
If your account has been in persistent debt for three years, a recommended payment amount will start to feature on your monthly statements.
By paying this amount each month, it will help you to repay your balance more quickly.
The recommended payment will include your minimum payment, any overdue payments, and will take into account if your card is still being used. The amount can therefore vary each month, so make sure you keep an eye on your statements.
If your account has been in persistent debt for three or more years, and you are not paying the recommended monthly payment, you may lose the ability to make further transactions with your credit card. This is to help you make progress with repaying your balance.
If you need your credit card for essential living expenses, contact us so we can find a way to help.
If your account is in persistent debt, it won't directly affect your credit score, but things like your repayment history and carrying high debt balances could.
If you are worried about your money, we are here to support you. You can get help with this online:
- Log on to Internet Banking or the app
- Tap 'Need help with your debt or payments?' on the account menu
- Get support with a repayment plan and money management tips
For additional support with any of your accounts, or for help and advice on how to better manage your money, visit our money worries page.