What is persistent debt?
Persistent debt is where you pay more in interest, fees and charges over an 18-month
period than you do towards the amount you've borrowed on the card. This can happen if
you've been making minimum or low monthly payments over a long period of time. This
means it will take you longer to repay what you owe and cost you more in interest.
Rules were introduced by the Financial Conduct Authority (FCA) to help credit card customers in this situation avoid long term debt.
How do I know if my account's in persistent debt?
We'll be in touch by post to let you know. The letter will provide you with information about persistent debt and how you could save money on interest by paying a bit more each month. You'll also see a ‘voluntary payment' option on your monthly statement if you're in persistent debt. This is a suggestion on how much to pay to get your account out of persistent debt if you can afford to.
What can I do to get out of persistent debt?
If we've contacted you about being in persistent debt, you'll be able to get out of this situation by paying more of the amount you've borrowed on your card than you pay in interest or charges over the following 18 months. Here's some options that could help:
What happens if I stay in persistent debt?
If you're still in persistent debt after another 18 months, we'll write to you and
explain your options.
This will include the option to move onto a paydown plan. This is where your monthly payment would change to the amount you'd need to pay to clear your balance over 3 or 4 years. This means you'd pay less interest and pay your balance off more quickly.
If you don't get in contact with us at this point, we may suspend your card to prevent you from increasing the balance further.
How much should I pay?
If we've contacted you about being in persistent debt, we'll be showing a ‘voluntary payment' option on your monthly statement over the next 18 months. Paying this amount every month will ensure you're no longer in persistent debt when we reassess your account at the end of that period. You should always think about what you can afford, but it's one way to make sure you're paying as much towards the rest of your balance as you are towards the interest and charges on your statement.
A good way to explore what a difference increasing your monthly payments could make to
the time it takes to repay your existing balance and the interest you'll have to pay is
by using a repayment calculator like the one StepChange
It's important to remember that the calculator won't take into account any further
spending on your card. So you'll need to factor that in when deciding what you can
afford to increase your payments to.
There are different ways to change the way you pay to get yourself out of persistent debt. For other options, see our FAQ's.