Persistent debt

What you need to know about persistent debt and how you can reduce the cost of your credit.

 

We can help you:

  • understand what persistent debt is
  • work out whether you are in persistent debt
  • get support if you need it.
     

What is persistent debt?

The Financial Conduct Authority (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.

This means, without increasing your payments, it could cost you more in interest and charges and take several years to repay the balance.

Persistent debt applies to credit or store cards because your payments can be relatively flexible.

How to save money on your credit card debt

The repayment calculator will help you see how long it will take you to repay your credit card balance, based on the amount you are paying monthly.

It will also show you how much you could save in interest charges if you just pay a little bit more each month.

To get started, you’ll need:

  • the balance on your credit card account
  • the interest rate being charged
  • how much you can afford to pay each month.

The calculator will show you the total amount of interest payable, the total cost of credit to repay, and how long it would take you to pay off the balance.
 

Repayment calculator

See how your monthly payments impact the time it takes to repay your balance and how you could reduce your interest payable.
 

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Results

Total interest paid = ##interest##

Total paid = ##total_paid##

Total time to repay = ##years## year(s) and ##months## months
 

How paying more will help reduce the cost of your credit

Your statements include a minimum payment amount, which you must make on time to avoid fees, losing any promotional interest rates and damaging your credit score.

If you continue to pay more interest, fees and charges, than you are paying off your balance for 36 months, we’ll look at other ways to help you clear the amount you owe. This may include stopping your card or lowering your credit limit.

This is a simplified example, based on a balance of £3,000 with an effective interest rate of 24%.

Paying the minimum costs you the most

Starting at £84 and reducing over time.

To clear your balance, it will take:

28 years and 3 months

Interest paid: £5,214

Total paid: £8,214

Paying a fixed amount costs you less

Paying £84 each month.

To clear your balance, it will take:

4 years and 10 months

Interest paid: £1,866

Total paid: £4,866

Paying a little more costs you the least

Paying £124 each month.

To clear your balance, it will take:

2 years and 9 months

Interest paid: £981

Total paid: £3,981

This example assumes that you don’t use your credit card, there are no extra fees or charges, and the interest rate doesn’t change.

The minimum payment is 1% of the outstanding balance, plus standard interest, fees and charges.

How to avoid getting into persistent debt

Setting up a direct debit will make sure your payments are made on time. You can choose from a minimum payment, fixed amount or a full payment direct debit.

By paying more than the minimum amount, you will reduce your balance quicker and avoid being in persistent debt.
 

Set up a direct debit

By setting up a direct debit you can be sure that your payments are reducing your debt.

 

Set up a direct debit

 

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  • We'll write to you if you have paid more in interest, fees and charges than you have paid off the balance, over 18 months or longer. This letter will include information and tips on repaying your balance sooner to cut your borrowing costs.

    If we have your mobile number and think it’s affordable for you, we’ll send you a text message each month with a suggested payment amount. It will show the amount that you can choose to repay to help get you out of persistent debt.

    After a further 9 months we'll check in to let you know how things are going. We'll tell you if you're managing to pay more off your balance than in interest, fees and charges.

    18 months after your first letter about persistent debt, we'll check your account again. If you're still in persistent debt, we'll inform you.

    We'll give you a recommended payment amount for you to repay each month. This way, you can clear your balance in about 4 years. You'll also pay less interest during this time.

    Your monthly statements will show this recommended payment amount. This amount can change each month. It will include your minimum payment, any overdue payments, and any transactions you make if you still use your card.

    During these 4 years, we will write to you yearly, to let you know how you are progressing on your persistent debt journey.

    If we have your mobile number, we might send you a few more reminders and suggestions between these letter to help you. This will include a monthly a text message to remind you how much you need to pay that month to get out of persistent debt in the next 4 years.

    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 18 months, a suggested payment amount will show on your monthly statements. This is the amount you can choose to repay to help get you out of persistent debt.

    If you have been in persistent debt for 3 years and do not pay the suggested payment amount each month, a recommended payment amount will then feature on your monthly statements instead.

    This recommended payment amount is the amount you can choose to repay to help you get out of persistent debt by the end of your 4-year paydown plan.

    The recommended payment will include your minimum payment, any overdue payments, and will consider if you still use the card.

    Both the suggested payment amount and the recommended payment amount can vary each month. By paying this amount monthly, you will repay your balance more quickly.
     

  • If your account has been in persistent debt for three or more years, and you are not paying the recommended monthly payment we will stop your card. This is to help you make progress with repaying your balance.

    If we stop your card, we will close your account after you've cleared 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.

    To help prevent your balance increasing too much while you’re in persistent debt, we may lower the total amount you can spend. This could have an indirect impact on your credit score.

    Things like your repayment history and carrying high debt balances could also affect your credit score.

    Learn more about what affects your credit score.

  • If you are worried about your money, we have help and support on our money worries page.

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