Help if you’ve been contacted about your credit card and persistent debt

If you’re contacted by your credit card provider and told you’re in persistent debt, you might be confused as it might not feel like you’re in debt. What this means is you’re being charged more in interest, fees and charges than you’ve repaid in the last 18 months. 

What is persistent debt?

If you’ve paid more in interest, charges and fees than you’ve repaid on your credit card balance over an 18-month period, you’ll be classified as being in persistent debt.

When this happens, your credit card provider has to get in touch with you to let you know and offer you help.

The credit card provider also has to:

  • ask you to consider whether you can afford to repay more quickly
  • make you aware of the potential implications of continuing with low repayments, including the possibility your card could be suspended, and possible impacts on your credit file
  • let you know if you can’t afford to repay more quickly, that you can get in touch with them to discuss your circumstances so they can help. Or, if necessary, you can get free debt advice.

If you’ve received a ‘persistent debt’ letter from your credit card provider and are not sure what to do next, StepChange can help. They offer guidance and a free and impartial budgeting service to help you understand and manage your financial situation.

I’m making minimum repayments, isn’t that enough?

Credit card companies are obliged by law to set a minimum repayment level that customers are expected to pay. They’re the smallest amount the credit card company is happy to let you pay back per month.

Paying only the minimum repayment over the short-term can help you spread the cost of more expensive items. But in the longer term, they become an expensive way to repay what you owe. 

A minimum repayment example

If you had £5,000 outstanding on a credit card, with an interest rate of 19.9%, your minimum repayment would be £132.92.

If you don’t spend any more on the card, your minimum repayments would go down every month.

However, after three years, your outstanding balance would still be £1,895.51 and you would have paid £1,936.66 in interest.

At this rate, it would take you 18 years and 10 months to pay of the total balance – and you would have repaid £12,277.84 in total.

If you increased your repayment to £200 every month instead, your £5,000 credit card balance would be paid off in just 2 years and 9 months. You’d pay back £6,511.27 in total, saving you £5,766.57 in interest.

In the table below, we compare what happens if you repay different amounts – £150, £175 and £200 – every month.

These examples assume the original amount owed was £5,000 and you don’t spend any more on the card while you’re making repayments. 

Repayment schedule
Interest paid in total
Total paid back
How long it takes to repay the £5,000 loan

Minimum payment - First month £132.92, reducing every month after

£7,277.84

£12,277.84

18 years 10 months

£150 every month, fixed

£2,338.96

£7,338.96

4 years 1 month

£175 every month, fixed

£1,831.93

£6,831.93

3 years 4 months

£200 every month, fixed

£1,511.27

£6,511.27

2 years 9 months

If you’ve been contacted by your credit card provider about persistent debt, the easiest way to deal with this is to increase your repayments to an affordable level for you. Making small changes can save you hundreds or thousands of pounds.

Being contacted about persistent debt is an opportunity for you to look at your credit card balance and see if it’s costing you more than you want.

Instead of thinking about it as a demand for money, think of it as a way of taking control and reducing the overall cost of your borrowing.

My credit card company have told me they’re increasing my repayments

The minimum repayment on a credit card has to be set at an amount that at least repays the interest, fees and charges applied to your account, plus 1% of the outstanding balance.

The new rules don’t mean credit card providers have to force you to repay more by automatically increasing your monthly credit card repayments.

However, some bank or credit card companies, have decided to change their terms and conditions to increase the minimum repayment required to get customers out of persistent debt.

If this happens and you can’t afford the increased repayment, contact your bank or credit company. If you feel you’re not ready to do this, you can also get in touch with StepChange.

StepChange offer a free and impartial budgeting service, to help you understand your financial situation.

What can I do to stop my credit card company contacting me?

If you want your credit card provider to stop contacting you, the easiest thing to do is to increase the monthly amount you’re paying off on your credit card bill. This is providing you can afford it.

Your credit card company should help you with this, to make sure your monthly repayment is high enough to pay off your outstanding credit card balance in a reasonable amount of time.

If you repay more now, you’ll be paying back your credit card balance sooner. So you’ll be free of what you owe faster, paying less in interest as your outstanding credit card balance gets smaller.

You might also be able to transfer your credit card balance to a card charging a lower rate of interest or one offering an introductory 0% interest rate if you qualify. This could mean you’ll pay less interest on your existing debt.

Most credit card providers will usually charge a fee for balance transfers so it’s important to bear this in mind, as well as the length of any introductory period.

I can’t afford to pay more towards my credit card

If you don’t think you have enough money to increase your repayments, speak to someone about your financial situation.

Talking early will stop things getting worse. You can call your bank or credit card company to find out what help they can offer.

If you don’t feel comfortable doing this, you can get in touch with StepChange. They offer a free and impartial budgeting service, to help you understand your financial situation.

It’s also possible your finances need some serious re-planning to find the extra money your credit card provider is asking for.

Working out a household budget is a great way to understand where your money is going and where you can cut back.

You can also look at some ways to cut back on your spending and maximise your income. 

I have other payments I need to make

If your credit card bill isn’t the only thing you’re struggling to pay, you need to look at getting some free debt advice.

If you’re having major money worries, the last thing you might want to do is talk to a complete stranger about them.

But it can be the best thing you can do.

All advice is confidential, and nobody will judge your situation. They just want to help you find the best solution for your situation.

You can contact an adviser in a way to suit you – online, over the phone or face-to-face.

What happens if I do nothing after being contacted?

If you don’t increase your repayments after your credit card provider has contacted you, they’ll get back in touch with you around nine months later.

Once again, they’ll recommend you increase your repayments if you can afford to.

If you’re still in the same situation nine months later, your credit card provider will have to do one of two things:

  1. Offer you ways of repaying more quickly over a reasonable period, usually between three and four years. For example, by transferring the balance on your credit card to a lower-interest personal loan.
  2. If you can’t repay more quickly, they must offer further ways to help you. For example, by reducing, waiving or cancelling any interest or charges. If they do this, they could also suspend your credit card, unless doing so would have a significant adverse effect on your financial situation. For example, because you depend on your credit card for to pay for essential living expenses like your mortgage, rent, Council Tax or food.

Will my credit card be suspended?

Your provider should only suspend your credit card because of persistent debt as a last resort. But it could happen if you keep ignoring your provider and don’t make changes to how you repay your credit card bill.

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MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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