What you need to know about persistent debt

New rules have been introduced by the Financial Conduct Authority (FCA) with the aim of supporting credit card customers avoid long-term debt. If you’ve been making minimum or low payments over the past 18 months, you’ve paid more in interest, fees and charges on your Barclaycard than towards paying back what you’ve borrowed. And under the new rules, this means your account is in something called ‘persistent debt’.

No, you haven’t done anything wrong – lots of customers making minimum or low repayments have been sent this letter.

If you can’t increase your payments sufficiently, your account will remain in persistent debt and we’ll work with you to repay your balance over a reasonable period of time, at an amount that’s affordable for you.

Persistent debt is a term used by the Financial Conduct Authority (FCA). It describes any account where the person is paying more in interest, fees and charges than towards paying back what they’ve borrowed. And this is the case with your Barclaycard. Remember – credit cards are designed for short-term borrowing. It’s best not to keep a lot of debt on credit cards for a long time. If you want to borrow money for a long time, a loan may be more helpful.

The rules have been created by the organisation that regulates the banking industry – the Financial Conduct Authority (FCA).

Yes – as long as your account’s open, you can carry on using it. If we need to suspend your card we will let you know before this happens. If you do spend on your card, please make sure you can afford any increase to your monthly payment.

Your minimum payment is set at a low level to give you the flexibility to pay low amounts for a short time. It’s not a good idea to pay low amounts for a long time as this will mean you pay more in interest and it will take you a long time to pay off your balance.

We’ve worked out how much you need to pay each month to help you pay less interest and get out of persistent debt. This is calculated to ensure you pay at least double any interest, fees and charges over this 18-month period. The amount will vary each month if your balance changes or you’ve paid less than your personalised amount in previous months.

For us to work out your personalised amount, your account needs to be up to date. Once you’ve got things on track, we’ll give you more information about what you need to pay to stay out of persistent debt in the future. Sometimes your personalised amount may be equal to your minimum payment – but remember, paying more will always help you pay down your balance quicker.

Your minimum payment’s there to give you flexibility when money’s tight. It’s better to make higher payments when you can. And you may find it easier to set up a Direct Debit for a fixed amount that’s higher than your minimum amount.

Under the rules, you have 18 months to get out of persistent debt. If you’re still in persistent debt after this time, we’ll work with you to repay your balance over a reasonable period of time, at amount that’s affordable for you – this may involve us having to suspend your card.

Then you can pay the minimum amount. But bear in mind that you’ll need to pay even more in the future. If you can’t afford to make your minimum amount then let us know and we’ll see how we can help.

Yes – as long as your account’s open, you can carry on using it. If we need to suspend your card we will let you know before this happens. If you do spend on your card, please make sure you can afford any increase to your monthly payment.

Making minimum or low payments over time can affect your credit score, which helps other lenders decide whether to lend money to you. So paying more each month can help with that. However, there’s no direct link between your credit score and your account being in persistent debt.

Please make sure you can afford any increases before you change your monthly payments. If you’d like to talk to us about your financial situation and see if it’s possible to increase your payments, please get in touch on 0808 169 7904 (+44(0)203 9126646 from abroad) and we’ll be happy to talk through your options with you. Alternatively, you can visit our money worries hub to find out how we can help.

If you still have last month’s communication, and your balance hasn’t changed too much, then please refer to that to get an idea of how much you should be paying, and try to pay as much as you can afford.

We will continue to assess your account to see if it remains in persistent debt. You may still receive a letter about this but you don’t need to take any further action for now. Once your payment holiday has ended, and if it’s affordable to do so, you should think about paying more than the minimum payment each month – this will help you pay off your balance quicker and pay less in interest.

We may have recently contacted you about your account being in persistent debt and to offer you a Paydown Plan. We also let you know that your card would be suspended and the date this would happen, if we hadn’t heard from you.

However, if you have taken a payment holiday on your card, and to help you during this difficult time, you can continue to use your card for now. We’ll be in touch again after your payment holiday ends to let you know what happens next.

If you had taken a payment holiday during the period that your account had been in persistent debt for 36 months, then we will send you your letter with your Paydown Plan offer once your payment holiday ends.

A Paydown Plan is a fixed monthly payment plan that can help you clear your balance sooner, while paying less interest. To see how we can help you set up a personalised plan that’s affordable for you, watch our quick, handy video below.

As long as you keep up with your monthly payments, there won’t be any impact on your credit file.

We don’t have all of the information we need to complete our assessment for your application for another card. We need you to send us further information about your income so that we can make the best decision possible.

We only want documents that you should already have available, for example, three consecutive months of bank statements, your last tax return, or your payslips. Follow the steps in the table here to find out what documents you need to send.