New rules on credit card debt: what do they mean for me?

Posted 18 October 2018

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Are you in 'persistent credit card debt'? We explain the new rules.

Are you paying the minimum off your credit cards each month? If so, you could be in ‘persistent credit card debt’. And under new rules that came into force last month, your lender could be required to help you clear it.

Why have these new rules been introduced?

The FCA estimate that around 4 million credit card holders fit their definition of persistent debt. They believe the new rules will prevent many from building up problem debt. What’s more, the FCA says customers will save hundreds of millions of pounds every year.

Am I in persistent credit card debt?

The most common way to build up long term credit card debt is by making just the minimum payment each month. Many people who do this don’t think of themselves as struggling with their debts. And short periods of making minimum payments - for example in December and January - are not necessarily a sign of financial problems.

So the FCA only defines someone as in persistent credit card debt if, over an 18-month period, they repay less off the balance of their card than they’ve paid in interest, fees and charges. On average, credit card holders in persistent debt pay back £2.50 in interest and charges for every £1 they borrow. And this gradually mounting debt could very easily lead to debt problems if your income or circumstances change for any reason.

What will lenders have to do differently?

The FCA now requires lenders to contact people in persistent debt at 3 points. Here’s what will happen at each of them.

18 months

Your lender will:

  • Let you know that over the preceding 18 months, the amount you paid off your balance was lower than the amount you paid in interest, fees and charges
  • Advise you that making higher payments would reduce the cost of borrowing and the amount of time it would take you to repay
  • Invite you to contact them to discuss your financial situation
  • Warn you about further action they could take if you keep making minimum payments for a further 18 months (see 36 months, below)
  • Signpost you to debt advice.

27 months

If it seems likely that you will still be in persistent debt at 36 months, the lender must write to you repeating the previous warnings and advice.

36 months

At this point your lender must offer ways to help you pay off your debt more quickly. This could include a repayment plan, which would work a bit like a loan.

If you can’t afford the ‘loan’, the lender is required to offer you some support. This might mean reducing the interest. However, it would usually also mean suspending your card, and reporting it to credit reference agencies as in arrears.

What to expect

If you’re in persistent debt, your credit card provider will contact you soon using the ‘18 months’ interventions described above. You may have heard from them already.

A number of credit card providers have already increased their minimum monthly repayment percentage. This will avoid customers being caught by the persistent debt rules. Lenders have also agreed not to offer unsolicited credit limit increases to borrowers who have been making minimum payments for some time.

Avoiding persistent debt

It’s best to pay off your credit card balance in full each month if you can. However, if you can’t manage that, do at least try to make more than the minimum payments. Under the new persistent debt rules, doing this will reduce the risk of your credit card provider taking action that could damage your credit rating later. It will also reduce the amount of interest you pay, and the time taken to pay off your balance. Here are some examples.


Let’s say you have a balance of £2,000 on a credit card with 19.9% APR.

If you only make the minimum payment it will take more than 24 years to repay a total of £4,854.

If you pay off £51 every month you should clear the debt in around 5 years, paying around £3,070 in total.

If you pay off £100 per month, it will take around 2 years to clear a total debt of £2404.


For a £300 balance on a card with 54.9% APR:

If you only make the minimum payment it will take you more than 12 years to pay a total of £1,127 – more than three times the amount you borrowed.

If you pay off £51 per month you can clear the debt in 7 months, paying a total of £345; if you pay £100 per month, you will take just 4 months to repay a total of £25.

Both of these examples assume you are no longer using the card. They were calculated using CardCosts, an online tool from UK Finance – try it yourself to see how long it will take you to pay off your cards.

If you think you’d struggle to pay any more than the minimum, you might benefit from debt advice now. You can see what other options may be suitable for you here.


by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.