Understanding credit card arrears

‘Arrears’ is a phrase that often crops up in business and finance, and it can mean a few different things.

You may have heard of ‘payment in arrears’, this is when you pay for something after a service has been provided rather than in advance. Your salary is probably paid in arrears, as you’ve already worked your hours before you get paid for them. Likewise, your plumber will typically 'bill you in arrears' after your leaky pipe is fixed or drain unclogged.

Arrears can also be used when a company or individual hasn't paid the bill by the date set for payment. When it comes to credit cards, if you don’t make your minimum monthly payment on time, you’ll be ‘in arrears’ until the sum owed is paid.

What happens when I’m ‘in arrears’?

You can fall into arrears for a number of reasons – you could be struggling to afford your repayments, or you may have simply forgotten to make a transfer.

If your credit card is in arrears, typically, your lender will get in touch to let you know and remind you to make a payment. You may be charged a fee for a late payment and also have to pay more in interest.

If you remain in arrears for a number of months despite warnings, the situation may be escalated, so it’s important to take steps to address it as quickly as possible.

How can I get out of credit card arrears?

The easiest way to get out of credit card arrears is to pay what you owe and any related charges on your account. But, if this isn’t possible, there are other things you can try:

  • Stop spending on your card – once you’re in credit card arrears, stop spending on your card if you can help it, as you’ll add to your debt and face a bigger minimum payment the following month.
  • Talk to your lender – whatever the reason for your account being in arrears, it’s worth getting in touch with your lender and explaining what’s going on. If you’re struggling to make repayments they will be able to discuss your situation. If you missed a payment by accident, they may be able to refund some of the interest or extra fees you were charged.
  • Pay as much as you can – if you can’t make your full payment, it’s worth paying what you can, to reduce the amount of interest you pay on your outstanding balance.

Does being in arrears affect my credit?

Being in arrears can, unfortunately, affect your credit rating. However, the impact it has will vary depending on how often you’re in arrears, how long for and how recently.

If you fall behind on a payment, this will appear on your credit report, along with the number of months you’ve been in arrears. If you’ve taken action to get things back on track quickly then it may reduce the effect on your credit rating. Having multiple accounts in arrears or being in arrears for two months or more can have a more significant effect on your ability to borrow.

A record of arrears stays on your credit report for six years. It will then be removed, as long as they’ve been repaid in full.See footnote 1

If you’re worried about credit card arrears, or any other aspect of your finances, head to our financial support page to find out how we can support you.

Published October 2022

1. See StepChange for more information.