A Guide to Persistent Debt
Almost half of the UK population has some form of credit card with many of them only ever making the minimum repayments each month. These people may soon receive a letter from their credit card provider to discuss ‘persistent debt’. But what does it mean?
An account is considered as persistent debt when minimum repayments only pay off interest and charges on the account, instead of paying off the account balance. This is often a sign that the debt is beginning to get out of control. The Financial Conduct Authority (FCA) have ordered all credit card providers to contact customers who they believe are at risk of persistent debt.
All providers are required to suggest a higher repayment amount to help clear the balance, though they aren’t able to force this unless they update their terms and conditions. They must also warn customers of the potential repercussions of continuing to make minimum repayments which could mean them suspending the account in order to stop the balance increasing any further. Though this all may seem like doom and gloom, the aim is to help stop people getting into further debt. Providers are also able to work with customers to reduce their balance by lowering or freezing interest on the account or even suggesting they transfer their debt to a cheaper credit card for example.
If you’d like to know more about persistent debt or would like to speak to someone about your debt concerns you can contact StepChange who are a free, independent debt advice charity.
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