Dealing with persistent debt

If you have a credit card or a store card and regularly make the minimum payment, you might have received communications from your creditors where they mention ‘persistent debt’. Created with the help of our debt advice partner StepChange, the following content explains what persistent debt means and how you can tackle it.

What is a persistent debt?

This is a term used by creditors and financial services providers to describe a situation where a customer has been paying more in interest, fees and charges than they have paid towards their balance, for a period of 18 months or more. If you only make the minimum payment each month, or your lender has asked you to increase your monthly payment, then this guide is for you.

I’ve had a letter about persistent debt – what should I do?

It may be tempting to ignore letters from your creditors when you don’t feel like you’re in significant debt. However, we’d encourage you to think of your wider financial situation.

It’s important to remember that your creditors want to help you get out of persistent debt, so we recommend getting in touch with them as soon as you can if you receive a letter.

Where you can afford it, you should increase your repayments. If you don’t increase them, your creditor will continue to contact you and may take more serious action. It’s important to remember that they want to help you, so we recommend getting in touch with them as soon as possible if you receive a letter.

The timeline below shows what creditors are doing to encourage their customers to increase their repayments.

18 months

You’ll get a letter if you’ve repaid more in interest and charges than you have towards your credit card, store card or catalogue balance for 18 months. Your creditor will contact you, encouraging you to take action so that by month 36 (18 months’ time) you’re paying more towards your balance than you are in interest and charges.

27 months

If your account is still in persistent debt and you haven’t contacted your creditor yet, they’ll send another letter encouraging you to increase your monthly repayments.

36 months

If you haven’t contacted your creditor, they’ll get in touch again asking you to take action. They may offer you a quicker way to pay off your account balance within a reasonable timeframe (usually three to four years). They’ll assess your finances, and propose options they think you can afford. They could suggest:

1. An affordable payment plan so you can pay off your credit card, store card or catalogue balance faster.

2. Clearing the account balance altogether by using another credit product, such as a loan or credit card.

3. They may decide to increase the minimum payment, to help you repay more quickly and save money on interest. If your creditor plans to do this, they’ll send you a letter explaining their intentions, along with what you should do if you can’t afford the new higher amount.

They may also consider other options such as reducing your interest rate. However, this could involve suspending your account, which may impact your credit file. Creditors will all have different solutions, so be aware of this if you have more than one credit card, store card or catalogue account.

If you don’t contact your creditor, they’ll suspend your card or account so you can’t use it, but you’ll still be charged fees and interest. Contacting a creditor can feel daunting, but it’s important that you get in touch as soon as possible.

How can I tackle a persistent debt?

You can start to tackle a persistent debt by increasing your monthly repayments. Our repayment calculator can help you to understand how much quicker you can clear your balance by paying a little more each month. It’s a good idea to put together a budget if you haven’t already, as this will help you spot areas where you can cut back and work out how much you can afford to pay towards your credit card or store card.

You could also consider a balance transfer, where you repay the balance using credit with a lower interest rate, but if you have a poor credit rating then a low-interest card could be harder to find. Look at StepChange’s guide to credit card debt to find out more about balance transfers.

What if I can’t pay more?

If you’re in persistent debt and you’re not able to increase your monthly payments, we’d recommend getting in touch with your creditors as soon as you can. This can feel intimidating but most creditors are more understanding than you might think, and could help you to find a way to manage your situation.

If you’re concerned about money or debt no matter how big or small, free, impartial advice is available. Visit www.stepchange.org to find out how they could help, or you can call them on 0800 138 1111 (Monday to Friday 8am to 8pm, Saturday 8am to 4pm).

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Other resources which you may find helpful:

Dealing with priority debts

Budgeting

Managing stress