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Persistent Debt – Everything You Need to Know with Tips

persistent debt uk

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

Persistent debt on your credit card is a hole in which you keep falling and falling.

However, the way to get out of this hole is timely action and intelligent spending. 

To better advise you, I’ve compiled this article on the topic of persistent debt, and everything you should know about it.

Let’s dive right in.

What is Persistent Debt?

Persistent debt is the scenario in which a person has spent more money on the interests and additional payments than they have on the actual loan repayment of their credit card for more than 18 months.

Persistent debt arises if you keep making minimum payments. You might even receive emails from your credit card issuer or suggestions that you should increase the minimum monthly payments if you don’t want additional issues.

Falling into Persistent Debt Despite Making Minimum Payments

The financial conduct authority (FCA) has advised that every single person paying more in interest and additional charges as compared to their outstanding balance in the last 18 months should try and increase their minimum payment.

When you only pay the minimum payment, most of your charges go out to clear your additional fees. The balance will not be cleared for a long time. If you don’t increase your payments, it might take a while till your dues are cleared.

This is why you should try to pay more than the minimum payment so that more money can go in paying your balance instead of paying off the additional fees.

Understanding Interest Rates & Additional Charges

Interest rates and charges accumulate on your debt as soon as it starts aging. For a longer outstanding loan, you have to pay more additional fees on it. Interest is the cost of borrowing from your credit card lender. 

Interest is a percentage which you have to pay out every year on your debt. This is an additional fee that you give to your lender for giving you a loan and allowing you time to repay it.

However, this means that the longer your dues aren’t cleared, the more your additional payments will be. Additional fees might also include some late payment fees or fees accumulated due to some negligence. 

If you choose the monthly repayment plan, your rate is divided by 12 and you give that amount every month. This makes it easier to pay off the additional fees and clear your dues in time before these charges accumulate and make a rather intimidating figure.

Your plan might also have some unique fees. You should review your plan in detail in the first place so that you have a good idea where all the fees are generating from. 

persistent debt

What Happens if You’re in Persistent Debt?

The FCA has instructed every credit card company registered in England to let their customers know as soon as possible if they’re stuck in persistent debt. The company makes you aware that you’re in persistent debt and you should try to increase your payments. 

They also provide you with additional credit card plans where the repayment might be easier. The company also tells you what would happen if you keep things the way they are and your debt is prolonged.

If you’re in persistent debt, the credit card issuer is instructed to get in touch with you and offer you some kind of help and guide you in choosing a plan better suited for your needs.

If the payments still don’t increase and your debt keeps increasing, the company first halts any activity on your card. Then, if you don’t clear your balance, they revoke the card and ask you in court to pay the balance and additional payments in full.

I Keep Getting Letters Regarding Persistent Debt.. 

If you receive a letter regarding your debt, contact your lenders as soon as possible and explain to them that you’re calling about the persistent debt letter they sent.

If you have a plan that is unaffordable, you have the right to challenge it. The payment plans should be reasonable and sustainable as instructed by the regulator. If you can’t afford any plans, you can try asking the lender to freeze the interest.

This can happen in cases where it is impossible to pay the debt if the interest on it isn’t frozen. So, it is definitely worth a shot to ask your lender to freeze your interest. If your lender doesn’t freeze the additional fees, tell them to tell you a plan where the payment is affordable.

Lenders are instructed to treat you as fairly as possible when it comes to helping you out as a customer. Let your lender know your situation and see what he/she has to say about it.

How Does Persistent Debt Affect Credit Score?

If you keep making minimum payments, it can affect your credit history. This can prevent your future lenders from lending you any sort of money for a good amount of time. Credit history is sorted out after a long time so you should do whatever you can to keep your slate clean.

How do I Get Out of Persistent Debt?

Firstly, contact your lender; he may be willing to freeze your interest and not charge any additional fees on your loans. Moreover, stop spending on your credit card until you’ve cleared your dues completely. 

You should also work out and review your budget to see how much you can actually afford to pay to your lender. 

Additionally, you should visit online credit card repayment calculators and work out how much you owe and how much you should pay monthly if you plan on repaying your loan on time with the additional charges on it. 

These calculators also have a percentage calculator that can instantly tell you what the amount is of your additional charges and how long it will take to pay those off as well.

‘Voluntary Payment’ Option

This is an amount that shows on your credit card statement. It tells you how much you need to pay that month in order to stay right on track. This amount is worked out so that at the end of 18 months, you have cleared your dues entirely.

Taking this will also mean less additional fees and the clearing of your dues sooner as compared to the minimum payment option.

Direct Debit Option

This option gives you an amount that you have to pay each month to completely stay on track. This amount is usually a fixed amount and it is optimized as such that your additional payments are reduced and the debt is also cleared in time. 

This is a good option if you have a constant stream of income and can stick to the payment of a fixed figure.

FAQs – All You Should Know About Persistent Debt

Can my credit card be suspended?
If you keep making unacceptable payments on your credit card debt, the credit card company may decide to revoke your card. This means that you will never be able to use that card again and the credit card company will contact debt collectors to recover their balance. You won’t even get your card back even if you decide to pay the whole outstanding balance in full.
How bad can it get?
The credit card company adds additional charges in the form of interest on your entire balance. This means that the higher your balance, the more the additional charges will be on it. This is why you should try and clear your dues on time because if your balance increases, your additional bill will also increase which will further increase the amount to be paid. This results in an endless loop and the only outcome visible at that point is the revocation of your credit card.
Does it matter if I’m already on a repayment plan?
If your balance exceeds a certain amount set on your credit card account, then your card will be revoked and you will have to go to court to repay your card debt. At that point, your credit card will be revoked even if you are willing to pay the whole amount in full.
What if I can’t afford to pay more than the minimum payment?
If you cannot afford to pay more than the minimum amount, you might want to reconsider credit card companies that charge less interest. This is called a balance transfer. To pay the minimum amount, you can also get a loan that charges less interest than your credit card. However, if you’re getting additional debt, make sure the loan is not secured on your home. If that happens, you could potentially lose your house if you don’t clear your outstanding balance with the lender. Also, consider taking professional debt advice if you’re in such a situation.
Where to get free independent advice on my situation?
There are a lot of free debt advice forums on the internet that can provide basic debt advice for free. You can also look online for debt help and guidance, You can also contact Payplan and even visit their website. On their website, you’ll find a lot of free debt help and advice. If you want more, make sure you keep reading our articles too.

A Quick Recap

The minimum payment on your credit cards is regulated by the financial conduct authority. This amount can still be considered low if your debt is too high. Paying only the minimum even if your debt is very high is what makes your debt persistent. 

Make sure you pay an amount proportionate to the debt that you have under your name. If you can’t afford the additional fees, consider switching your credit cards and get your balance transferred to another company who offers a better interest rate.

If you need additional help, feel free to get in touch for debt advice.


Are you struggling with debt?
Are you struggling with debt?
  • Affordable repayments
  • Reduce pressure from people you owe money to
  • Stop interest and charges from soaring