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    • Persistent debt

    Persistent debt

    Understanding persistent debt could help you reduce the cost of your credit.

     

    We can help you understand:

    • what persistent debt is
    • whether you are in persistent debt
    • how to get help if you need it.

    What is persistent debt?

    The Financial Conduct Authority (FCA) defines persistent debt as when you are paying more in interest, fees and charges than you are paying off your credit or store card balance, over a period of 18 months or longer.

    If you don't increase your payments, it might take several years to repay the balance. This could cost you more in interest and fees.

    Persistent debt applies to credit or store cards because your payments can be fairly flexible.

    How to save money on your credit card debt

    By using the repayment calculator, it’ll help you see how long it'll take to repay your credit card balance. It works this out from the amount you pay each month.

    It can also tell you how much you could save in interest charges if you increase your monthly payment a little each month.

    To get started, you’ll need:

    • the balance on your credit card account
    • the interest rate being charged
    • how much you can afford to pay each month.

    The calculator will work out the total interest to pay and show you the total cost of the credit borrowed. It will also show you how long it’ll take to pay off the remaining balance.

    Repayment calculator

    Check how the amount you pay each month affects the time it takes to pay off your balance. Paying your balance off quickly can reduce the amount of interest you’ll pay.

    £
    £

    Results

    Total interest paid = ##interest##

    Total paid = ##total_paid##

    Period of time = ##years## year(s) and ##months## months
     

    Good to know

    The more money you pay each month, the less you’ll pay in interest and charges and the quicker you’ll pay off your balance.

    Paying more will help reduce the cost of your credit

    Your monthly credit card statements include a minimum payment amount. You need to make this payment on time to avoid fees, lose any promotional interest rates and stop any damage to your credit score.

    If you've paid more in interest, fees, and charges than on your balance for 36 months, we can help you. We can explore various ways to help you clear your balance. This might include stopping your card or lowering your credit limit.

    Here’s an example of how it works, based on a balance of £3,000. This is based on an effective interest rate of 24%.

    Paying the minimum costs you the most

    Starting at £84 and reducing over time.

    To clear your balance, it will take:

    28 years and 3 months

    Interest paid: £5,214

    Total paid: £8,214

    Paying a fixed amount costs you less

    At £84 each month.

    To clear your balance, it will take:

    4 years and 10 months

    Interest paid: £1,866

    Total paid: £4,866

    Paying a little more costs you even less

    At £124 each month.

    To clear your balance, it will take:

    2 years and 9 months

    Interest paid: £981

    Total paid: £3,981

    This example assumes that you don’t use your credit card, there are no extra fees or charges, and the interest rate doesn’t change.

    The minimum payment is 1% of the outstanding balance, plus standard interest, fees and charges.

    More ways to pay your credit card.

    Avoiding getting into persistent debt

    A direct debit makes sure your payments are made on time. You can set up a minimum payment, a fixed amount or a full payment direct debit.

    If you pay more than the minimum amount, you’ll reduce your balance quicker and avoid being in persistent debt.

    How we can help

    We are committed to helping you to pay off your credit card balance in a reasonable time frame.

    If we think you are in persistent debt, we will:

    • get in touch and offer you practical advice
    • update you regularly so you can track your progress
    • connect you with our specially trained colleagues to answer any questions you may have
    • help you work out how much you can afford to pay each month
    • get you set up with a direct debit.

    Recommended payment amount

    If you've been in persistent debt for over three years, consider setting up a direct debit for the recommended payment amount. This amount is more than the minimum and is given to help reduce your balance faster and means you will pay less interest.

    It’s easy to set up a direct debit for the recommended payment amount using online banking or the mobile banking app. Select the three dots in the top corner of your credit card account. Then select 'Manage direct debit'.

    If we have your mobile number, we'll tell you what the recommended payment amount is by a monthly SMS.

    If you don’t want to pay by direct debit, you can make payments in other ways. 

    Set up a direct debit

    A direct debit will make sure that your payments are paid on time and are reducing your debt.

    Set up a direct debit

    Getting started online

     

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    A look at the details

    • Will you contact me about persistent debt? expandable section

      If you have paid more interest, fees and charges than off the balance, over 18 months or longer, we’ll write to you.

      We’ll include information and tips on how to repay your balance sooner to reduce your borrowing costs.

      We'll send you a monthly text message if we believe you can afford it and have your mobile number. This message will suggest a payment amount. You can select to repay the suggested amount. Doing this will help you get out of persistent debt.

      In nine months, we'll check back with you to see how everything's going. We’ll also let you know if you're paying off more of your balance than the interest, fees, and charges you owe.

      18 months after your first persistent debt letter, we’ll contact you and let you know if you're still in persistent debt.

      We'll give you a recommended payment amount for you to repay each month. This way, you should be able to clear your balance in about four years. Paying less interest during this time.

      You'll still receive your monthly statement. This statement will show the recommended payment amount. It will include your minimum payment and any overdue payments. The statement will also account for any transactions you make with your card. This means the amount can change each month.

      We’ll write to you every year for four years and let you know how you are doing on your persistent debt journey.

      You may also get extra reminders and suggestions in addition to these letters. If we have your mobile number, you'll also receive a monthly text message. This message will tell you how much you need to pay each month to get out of persistent debt in about four years.

      Any action we take is aimed at helping you to cut your borrowing costs and repay your balance more quickly.

    • What is the difference between a suggested payment amount and a recommended payment amount? expandable section

      If your account has been in persistent debt for 18 months, a suggested payment amount will start to feature on your monthly statements. This is the amount you can choose to repay to help get you out of persistent debt.

      If you do not pay the suggested payment amount each month, when you have been in persistent debt for 3 years, a recommended payment amount will start to feature on your monthly statements instead. The recommended payment amount is the amount you can choose to repay to help you get out of persistent debt by the end of your 4-year paydown plan. The recommended payment will include your minimum payment, any overdue payments, and will consider if you still use the card.

      Both the suggested payment amount and the recommended payment amount can vary each month and by paying this amount each month, it will help you to repay your balance more quickly.

    • Will I lose the use of my credit card? expandable section

      If your account has been in persistent debt for three years or more, we may stop your card. This will happen if you miss the recommended monthly payments. We take this step to help you pay off your balance and make progress.

      If we stop your card, we’ll close your account after you've cleared your balance.

      Let us know if you need your credit card for essential living expenses, and we’ll find a way to help you.

    • Will persistent debt affect my credit score? expandable section

      Being in persistent debt won't directly affect your credit score. But we may lower the amount you can spend to help you manage your debt. This change will prevent your balance from getting too high.

      It could also affect your credit score indirectly along with things like your repayment history and carrying a high debt balance.

      Learn more about what affects your credit score.

       

    • Where can I get help with money worries? expandable section

      If you are worried about your money, we have help and support on our money worries page.

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