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What you need to know about persistent debt and how you can reduce the cost of your credit.
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.
Essentially this means, without increasing your payments, it could take several years and cost you more in interest and charges, before you’ll repay your balance.
Persistent debt mainly applies to credit or store cards because your payments can be relatively flexible.
We’ll get in touch to let you know if we think you’re in persistent debt and give you practical advice to help you move forward.
This is a simplified example using a balance of £3,000 with an effective interest rate of 24%.
This example assumes that you don’t use your credit card, no additional fees or charges are incurred, and the interest rate doesn’t change. The minimum payment is calculated at 1% of the outstanding balance, plus standard interest, fees and charges.
More about minimum payments.
You can also talk to independent organisations who offer support with money worries, like;
We'll write to you:
We may send reminders and suggestions in between, if we think it might help you.
Any action we take is aimed at helping you to cut your borrowing costs and repay your balance more quickly.
If your account has been in persistent debt for three years, a recommended payment amount will start to feature on your monthly statements.
By paying this amount each month, it’ll help you to repay your balance more quickly.
As it will include your minimum payment, any overdue payments, and will take into account if your card is still being used, the amount can vary month to month, so make sure you keep an eye on your statements.
If your account has been in persistent debt for three or more years, and you are not paying the recommended monthly payment, you may lose the ability to make further transactions with your credit card. This is to help you make progress with repaying your balance.
If you need your credit card for essential living expenses, contact us so we can find a way to help.
If your account is in persistent debt, it won't directly affect your credit score, but things like your repayment history and carrying high debt balances could.