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Persistent debt

If you've been paying off your balance slowly for a long time, then new rules from the Financial Conduct Authority (FCA) could apply to you.

Go straight to the information you need

The background

Why the FCA has introduced new rules

The FCA looked at 34 million credit card accounts and found that making low payments for a long time can be an expensive way of borrowing and sometimes hides underlying financial difficulty.

As a result, they introduced new rules to help customers who are making low payments to clear their balance faster and pay less interest.

What the new FCA rules could mean for you

Under the new FCA rules, credit card companies (like us) are getting in touch with customers who've made low payments for 18 months or more, to ask them to pay more towards the amount they've borrowed.

That increase should be high enough so that 18 months after we first get in touch, the customer has paid off more of what they borrowed than in interest, fees and charges.

You haven't done anything 'wrong' if we get in touch

Keeping up with minimum payments is important, but making low repayments for a long time can work out as expensive.

The idea behind these rules is to keep the overall cost of borrowing down.

Is this being in 'persistent debt'?

You might have seen or heard the term 'persistent debt' being used in the media and in different places by us. It's a bit of a blanket term that covers people in a wide range of situations. Because it's 'out there', we've mentioned it in some letters and emails.

Even if we get in touch, you might not feel like the term applies to you. The important thing is that you take note of the new FCA rules.

Have we asked you to pay more?

When we get in touch

If you've been paying more in interest and fees than towards the rest of your balance for 18 months or so, then you've probably had a letter or an email from us. That letter is the first step we take under the new FCA rules.

In it, you'll find information about increasing your payments to pay off your balance faster so you pay less in interest and avoid the consequences of the new FCA rules. Depending on your circumstances, we might increase your minimum payment to help with this.

Why we're asking you to increase your payment

If you pay off a bigger chunk of what you borrowed, you'll pay off your balance faster and pay less in interest.

By doing that, you'll avoid some of the steps we have to take later on under the new FCA rules.

How to pay down faster

Change your monthly payments

In the letters and emails we've sent about this, we've included specific information about increases to your monthly amount. But we've added an example here, to help you get an idea of the difference paying extra can make.

  Making the minimum* Fixed payment Paying a bit more
Monthly payment £35 in first month, decreasing over time £37 £47
Time to pay off 20 years, 6 months 3 years, 11 months 2 years, 7 months
Interest payment £2284 £704 £453
Money saved compared to making the minimum* None £1580 £1830

Note: this example assumes a simple interest rate of 30.34% per annum on a starting balance of £1,000 and that no fees or further transactions are applied to the balance.

*Based on a monthly minimum payment of 1% of balance, plus any interest and fees incurred.

Go for a top-up payment

If you have savings or cash to spare, you may want to pay a lump sum to clear some of your credit card balance. This will help you to pay less interest and may stop the new FCA rules applying to you.

The timeline (what happens when, under the new rules)

18 months

We get in touch if you've been paying down slowly for too long.

27 months

Depending on your situation, we may send you a reminder.

36 months

We may need to suspend your card and you'd have to choose a way to pay off your balance within a reasonable period.

Do you need to set up a Repayment Plan?

The rules are clear. We'd get in touch with the steps we need to take under the new FCA rules if there's not enough of a change to your payments by 36 months.

Here's what could happen:

  • Clear your full balance with higher monthly payments

    Under the new FCA rules, you have to clear your full balance within a reasonable timeframe.

    Depending on your circumstances, this could mean making higher monthly payments.

  • Suspend your card

    To help with that, or if we don't hear from you, we may need to suspend your card.

    If that happens, you wouldn't be able to spend using your credit card.

How to clear your balance

When we get in touch at 36 months, you need to commit to clearing your balance within a reasonable timeframe. That means setting up a Repayment Plan.

What is a Repayment Plan?

Basically, we take your outstanding balance and calculate how much you will need to pay each month over a reasonable timeframe to pay it off.

At the end of the Repayment Plan, you'll have cleared what you owed at the start, including interest incurred while paying down.

Repayment Plan example*

If your statement balance is £1,000

And you set up a Repayment Plan for £37 a month

You'll pay off in three years and eleven months

(Compared to making the minimum and paying off in twenty years and six months)

You'd also save £1580 in interest

Basically, we take your outstanding balance and calculate how much you will need to pay each month over a reasonable timeframe to pay it off.

At the end of the Repayment Plan, you'll have cleared what you owed at the start, including interest incurred while paying down.

*Based on a monthly minimum payment of 1% of balance, plus any interest and fees incurred. This example assumes a simple interest rate of 30.34% per annum and that no fees or further transactions are applied to the balance.

Setting up a Repayment Plan

We'll give you a few options for setting up a Repayment Plan.

You can set it up in the app, or by calling us at the time we get in touch about this.

If none of the options are affordable, we can still help you and we still need you to get in touch. Call us on 0800 952 4966.

Spending allowed or spending suspended

Depending on your circumstances, you may still be able to spend on your card after you've set up a Repayment Plan.

If that happens, then on top of the monthly amount that goes towards clearing the balance of your Repayment Plan, you would also need to pay back 3% of any new spend, plus interest and fees. The 3% amount will help to make sure you pay off any new spend in a reasonable period.

If you spend up to your credit limit, your minimum payment could increase substantially by the end of your Repayment Plan.

For some customers, that increased minimum payment won't be affordable. In those cases, we will suspend spending on their card.

The credit file impacts of setting up a Repayment Plan

We don't report Repayment Plans to the credit reference agencies. So if you set one up, it won't be marked on your credit file.

But if you miss a payment

If you set up a Repayment Plan, your minimum monthly payment will change on your next statement to include your new Repayment Plan amount. So if you miss a payment, you'll be missing your minimum payment.

We report missed payments to the credit reference agencies, so they may show on your credit file.

If you miss a payment, we may cancel your Repayment Plan while you get back up to date. We'll be in touch if that happens to see what we can do to help.

Once you're up to date we'll help to reset your Repayment Plan and check the payments still work for you.

At the end of your Repayment Plan

We will get in touch at the end of your Repayment Plan to let you know what happens next.

If your card has been suspended, you may be able to start using it again. Affordability is one of the things we'd consider when making this decision. For any new spend, the monthly minimum payment would be up to 3% of your balance plus fees and interest.

If you've kept using your card during your Repayment Plan, you will be able to continue using it.

Get help

If paying extra is a stretch

We're here to help. If we've got in touch and you can't afford to pay more, call us free on 0800 952 4966 and we can still help.

We're open 8am to 9pm, Monday to Friday, and 8am to 6pm, Saturday and Sunday.