Struggling to Pay Credit Card Debt – Guide, FAQs & More

Are you worried about your credit card debt? We understand your worry, and we are here to help. Every month, over 170,000 people visit our site seeking advice on how to manage debt. We are experts in this field, so you are in good hands. 

In this guide, we’ll help you understand:

•  How to deal with a letter about your credit card debt.
•  What it means if you have a persistent debt.
•  How to work out what you can pay.
•  What to do if you can’t afford the minimum payments.
•  How your credit card debt can affect your credit score.

We know that dealing with debt can be hard. But remember, you’re not alone. We’ll help you understand your choices and find a plan that is right for you.

I’ve Just Received a Letter About My Credit Card Debt, What Should I Do? 

The best thing to do is to respond to it immediately. Ignoring attempts of your credit card company to get in contact with you can be a very bad idea.

Firstly, you should check if you have any other priority debts. Credit card debt is a non-priority debt and should be dealt with after you have dealt with your priority debts. Priority debts can be anything that has more severe consequences such as you being evicted. 

If you have priority debt(s) that you need to attend to first, you can write to your credit card company and ask them to reduce your payments or freeze them until you can attend to your priority debts. 

You can also use tools to get an estimate of how much you need to pay to cover your debt. My free pay off calculator will give you an estimate based on your interest and repayment duration.

A loan payoff calculator might be a valuable resource if you have a loan debt in the UK and are struggling to meet repayments or just want to stay on track.

I’ve Received a Letter About Persistent Debt, What does this mean? 

If you’ve been paying the minimum amount towards your credit debt for a while, there’s a chance you may be in what’s called persistent debt.

Credit cards charge a high interest rate and there’s a chance that if you’ve been paying the minimum amount towards the debt for a long time, your debt may be growing faster than you’re paying it back. This would mean you would never be able to pay off your credit card debt. 

In this case, you will have to increase your monthly payments to the credit card company.

If you can’t afford to increase your payments, you can write to your credit card company informing them of this. They might take some measures to help you such as freezing interest and charges or writing off some of your debt. 

» TAKE ACTION NOW: Fill out the short debt form

Determining What You Can Pay

You should definitely try to pay at least the minimum payment each month. If you don’t, there’s a chance that the company might charge a fee and your credit rating may get worse as well.

Never prioritise your credit card debt over priority debts as well as essential living costs such as rent, utility bills, etc. Always make sure that you’ve attended to these expenditures first before you think about what you can pay towards your credit card debt. 

Try to pay the same amount of money each month as you won’t have to calculate how much money you’ll have left over each month. Plus, you will also be able to pay off your debt sooner.

This is because the minimum payment is a percentage of the total debt on your credit card. Once you start making payments, this amount will get smaller and thus, the minimum payment will get smaller as well. If you keep paying the same amount each month, you will definitely be debt-free sooner rather than later. 

If you are unsure of the amount of money you can pay each month and need help planning your payment plan, I recommend seeking debt advice from an advice service such as StepChange or Payplan. 

You can get free debt advice from them regarding how to pay off your credit cards debts. I don’t recommend that you go to a private debt management company for help as they will have their own charges which you might not be able to afford to pay. 

I Can’t Afford the Minimum Payments, What Should I Do? 

If you can’t afford them due to a short-term issue such as an injury that prevents you from going to work or temporary unemployment, you can write to the company and ask them to pause your case for a short amount of time. This will give you enough time to get back on your feet and start paying them back.

If you can’t afford to pay them in the long term, then I suggest you seek debt advice from an independent charity such as StepChange. They will give you debt advice as to how to manage your money as well as what your options are in regards to your debt. 

I Can Only Afford Minimum Payments and I’m in Persistent Debt, What Should I Do? 

Sadly, this is a situation that lots of people can find themselves in. Take a look at this example from an online forum.

If this is a short-term issue, you can keep paying the minimum amount of money until you are able to pay more.

If it’s a long-term problem, then you have a couple of options: 

• You can transfer the debt onto another card which charges less interest. This process is called a ‘balance transfer’. 
• You can get a loan that has less interest than your credit card. 

If you manage to secure a loan, be sure to use all that money to take care of your credit card debt only. 

If you are unable to secure a loan, this may be due to a poor credit score. It can be worthwhile to go over your credit file and ensure all the information is correct. If you feel that there is something in your file that is negatively impacting your score that shouldn’t be there, you can dispute it and get it removed. 

If you are still unable to secure a loan, I suggest getting debt advice from an independent charity regarding your situation. 

Can I be Sent to Jail for Credit Card Debt? 

This is a common concern that a lot of debtors come to me about. The fact of the matter is that there are very few unpaid debts that can actually land you in jail. Typically, these types of debt are criminal fines or government debt and even in those types of debt, imprisonment is the last resort after all other avenues have been explored. 

Credit card debt cannot land you in jail. If a debt collector or representative of your credit card’s company threatens you with imprisonment, you can choose to complain about them. 

What Can I Do to Avoid Persistent Debt?

Persistent debt happens when your payments go almost entirely towards interest or fees, and not the principal amount listed on your bill. It can be very difficult to drag yourself out of.

If you are in a persistent debt hole, you might want to consider a debt solution to help you clear your debts.

There are several different debt solutions available in the UK, so I recommend speaking to a debt charity as soon as possible. Their advisors will be able to look at your finances in detail and help you work out which debt solution will work best for you.

I have linked a few charities that offer these advisory services for free below.

Debt Management Plan (DMP)

A DMP is an informal debt solution that lets you pay off your debts via a single monthly payment.

Because it is informal, it is not legally binding so you are not tied into a DMP for a minimum number of payments.

Individual Voluntary Arrangement (IVA)

An IVA is a formal agreement between you and your creditors. You agree to pay a monthly sum that is distributed amongst your debts, and your creditors agree not to contact you during your IVA.

IVAs typically last for 5 or 6 years, and any outstanding debt is wiped off when it ends.

Keep in mind that IVAs are not suitable for everyone. You need to owe several thousand pounds to more than one creditor to be eligible. You also need to demonstrate that you have some disposable income every month.

Trust Deed

IVAs are not available in Scotland. Instead, you will need to opt for a Trust Deed.

Trust Deeds work in the same way as an IVA – you pay an agreed sum each month that is shared amongst your creditors, they can’t contact you, and any leftover debt at the end of your Trust Deed term is written off.

Debt Relief Order (DRO)

A DRO is a good option for those facing financial hardship with no assets and little income.

For 12 months, you make no payments, but your creditors freeze your interest and don’t contact you.

If your finances haven’t improved during this year, you may be able to write off your unsecured debts.

Bankruptcy

If you have debts but no realistic possibility of ever paying them off, you may need to declare bankruptcy.

Bankruptcy has an unfair stigma attached to it as it may be your only way of getting a financial fresh start. That said, it is a serious financial situation that should not be taken lightly.

Sequestration

Sequestration is the Scottish version of bankruptcy.

If you have little income and no valuable assets, you may be able to apply for a minimal asset process bankruptcy (MAP). A MAP is a quicker, cheaper, and more straightforward version of sequestration, so worth considering.

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How Do I Complain About a Credit Card Company?

If you think that your credit card company has been unreasonable or behaved inappropriately, you can make a complaint. You can also make a complaint if you feel that they have broken any of the Financial Conduct Authority’s (FCA) guidelines.

Make your first complaint to your credit card company so that they have the chance to sort out the issue themselves. I have a number of free letter templates that you can use to help make this easier.

If you feel that they have not taken your complaint seriously enough or have not addressed your issue properly, you can escalate matters.

You can make any secondary complaint to the Financial Ombudsman Service (FOS). They will investigate and, if your complaint is upheld, your credit card company may be fined. You could even be owed compensation.