The path out of persistent debt

When a bigger portion of a credit card customer's repayments go towards interest, fees and charges than to paying off what they borrowed, over an 18-month period, they're in what's now known as persistent debt. It can happen when monthly repayments stay low for a long time.

Credit cards offer customers flexibility to manage their finances and repayments. But there's a risk customers can build up and hold debt over a long period of time, without making much headway on the outstanding balance.

The Financial Conduct Authority (FCA) has introduced new rules to help millions of people get out of expensive, longer-term credit card debt, otherwise called persistent debt.

They're the result of an FCA credit card market study, which analysed 34 million credit card customers' accounts over five years and surveyed 40,000 consumers. It helped them build a comprehensive picture of real credit card use in the UK.

They found that making low repayments on credit cards for a long time can be very expensive and sometimes masks underlying financial difficulty. Under the new rules, at certain points in time, we have to prompt customers to make faster repayments or propose repayment plans to help them repay their debt more quickly.

This begins after 18 months of persistent debt, when a customer has paid more in interest, fees and charges than they've paid towards the amount they borrowed over an 18-month period.

Persistent debt rules apply to you if you paid more in interest, fees and charges than you paid towards the amount you borrowed, over an 18-month period. We'll write to you and let you know if you’re in this situation.

Under the new rules, credit card companies like us have to take a series of escalating steps to help customers break the cycle of persistent debt. We also have to make sure customers who can’t afford to repay more quickly are given help.

The fix is to pay more each month. Boosting your monthly repayments will help you repay the amount you've borrowed quicker and save you money on interest. And paying back a bigger chunk of what you’ve borrowed would put you on the path out of persistent debt.

If payments aren't high enough to change your situation in the 18 months after we first told you that you're in persistent debt, there are steps we have to take as part of the new rules. First, we'll write to you again after 9 months if it looks like you aren't making enough progress. Then after 18 months, we'd then offer ways for you to repay quicker, over a reasonable period. It'd be important for you to take action from there because we might have to suspend your card if you don't. Making low repayments for long periods can hurt your credit file too.

If you're finding payments difficult or can't afford to pay more than the minimum, explore the ways we can help.

It means we wouldn't let you spend on your card. It's part of the new rules that we might have to suspend your card if you stay in persistent debt for two 18-month periods in a row. We'd do this at that stage if you can't afford to pay off your card in a reasonable timeframe, if you tell us you don't want to increase your payments (even if you can afford to) or if you don't reply to our messages.

If you're up to date with your account, it's the lowest amount you can pay to avoid a late or missed payment fee. It includes any interest due for the month, and for most of our customers it'll also include any fees incurred (for example, because of a late payment in the previous month). You can find your minimum payment on your statement.

It's not a fixed amount, but a calculated percentage of your balance. As your balance reduces, so does the minimum payment you'll need to make each month. If you only make the minimum payment each month, it'll take you much longer to clear your balance.

Paying as much as you can over and above the minimum amount due is a good habit to get into. Whatever amount you pay that's above the minimum goes directly towards repaying what you borrowed. It means your debt will be repaid more quickly and it’ll cost you less in the long run.

If you pay by Direct Debit

Increase your monthly amount. You can view and edit your Direct Debit in your Capital One app. It's free to download if you don't already have it. Otherwise give us a call.

If you pay by debit card, or another way

Make your monthly payments bigger when you pay via your app, phone or online account. You can make extra payments at any time too.

The Financial Conduct Authority  opens in a new tab (FCA) is an independent public body that regulates credit card companies and other financial services firms in the UK. They aim to make financial markets work well so that consumers get a fair deal.