What is persistent debt?
Persistent debt is where, over 18 months, you're paying more in interest, fees and charges than you're paying off the amount you've borrowed with your credit card. This is an expensive way to borrow money. And it will usually take you longer to repay the money you owe.
How to avoid going into persistent debt
Here's an example how, by changing payment behaviour, you could pay off debt quicker and more cheaply.
Zoe's credit card balance is £3,000 and her interest rate is 17.9%. Her minimum payment this month is £71.45, with only £30 of it actually reducing her balance. The remaining £41.45 covers the interest.
That means she's paying more in interest and charges than repaying her balance.
If Zoe were to increase her monthly payment to £100, she'd pay £58.55 off her balance and £41.45 in interest. If she continued paying £100 each month, she'd pay £2,325 less in interest. And she would clear her debt 10 years and 8 months quicker than if she only made the minimum repayment each month.
How we'll contact you about persistent debt
The Financial Conduct Authority (FCA) has introduced rules to help people in persistent debt. As a responsible lender, we'll contact you to let you know that you're in persistent debt and provide options to help you get out of it.
Information:
Once your outstanding balance goes below £200, you'll no longer be in persistent debt.
After 18 months: suggested payment amount offered
We'll get in touch once you've been in persistent debt for 18 months to let you know that you're in it.
We'll also start providing you with a suggested payment amount each month, by letter or email. Paying this amount each month will take you out of persistent debt.
After 27 months: account review
We'll review your account again at 27 months. We'll write to you to let you know if you're still in persistent debt or not.
After 36 months: more support options offered
If you're still in persistent debt after 36 months, we'll write to you again with some options.
Option 1: Pay your balance in full
If you're able, the quickest and cheapest way to pay off your balance will still be to pay it off in one go. You can do this at any time.
You could consider using any savings to pay off what you owe. Or you could explore cheaper ways to borrow.
Option 2: Start a paydown plan
With a paydown plan, you'll have a set monthly payment with a lower interest rate (9.9% per year). We'll work with you to find a monthly amount you can afford.
A paydown plan gives you up to 4 years to pay off what you owe. You can pay more than the agreed amount each month to pay it off sooner.
We'll stop your card when you're on a paydown plan so you don't increase your balance.
Option 3: Increase your minimum payments
You can choose to take on a higher minimum monthly payment. This option will let you keep using your card while you pay off your balance.
We'll tell you what the higher monthly payment will be when you contact us. It will be calculated to allow you to pay off your persistent debt balance at your current interest rate within 4 years.
After 39 months: card stopped
If we don't hear from you after our letter after 36 months, we'll review your account again at 39 months.
We'll stop your card if you're still in persistent debt. This is to prevent you adding more to your balance, which could cost you more and means it takes you longer to pay off your debt.
You'll need to continue repaying your outstanding balance at your current interest rate. This will cost you more overall. Once your balance has been paid in full, we'll close your account.
You can apply for a new Nationwide card if you'd like. However, you won't be eligible for any introductory offers if you've had a Nationwide account in the past 12 months. Remember, you can only have one Nationwide credit card at a time. If you already have a credit card, you won't be able to apply for a new one.
If you pay off your balance and move out of persistent debt before month 39, your card won't be stopped, and your account will remain open. We'll write to you to let you know you're out of persistent debt and provide you with tips on how to avoid slipping back into it.
Start a paydown plan
You can also still speak to us at any time after 39 months to start a paydown plan. Like we explain after 36 months, a paydown plan will give you a new monthly payment amount with a lower interest rate (9.9% per year). To discuss a paydown plan, call us on 03456 00 66 11.
How to get out of persistent debt
To get out of persistent debt, you need to pay off more of your balance each month than you pay in interest, fees and charges. There’s more than one way to do this and the best way for you will depend on your situation.
1. Make additional payments
You can make additional payments to your credit card at any time. So, if you find yourself with a little cash to spare, why not use it to reduce your credit card balance? Additional payments will help you move out of persistent debt and bring down your balance faster.
2. You may wish to consider using your savings to bring down your balance
If you have savings, and don't need the money for something else, you could use these to reduce your credit card balance.
You'll be paying more in interest on your outstanding balance than you'll be earning on your savings. So, bringing down your balance will save you money in the long run.
Please make sure to check that there aren't any charges or impacts to your interest rate before you take out your savings.
3. Pay a fixed amount each month instead of the minimum payment
If you don't plan to spend any more on your card, think about changing to a fixed payment. It doesn't have to make a big difference to your monthly outgoings and could save you a lot.
If you can't view the whole table, swipe, scroll, or rotate your phone to show more > > >
| For a card with a balance of £3,000 and an interest rate of 17.9% | If you make your minimum payment | If you make a fixed payment | If you make a bigger fixed payment |
|---|---|---|---|
| Monthly payment | Starts at £72, and reduces each month as the balance decreases | Fixed at £72 every month | £100 |
| Time to pay off your balance | 14 years and 1 month | 5 years and 3 months | 3 years and 4 months |
| How much you’ll pay in interest | £3,227 | £1,499 | £901 |
| How much money you’ll save | n/a | £1,728 | £2,326 |
To work out the right numbers for your card, try cardcosts.org.uk (opens in a new window). It's a free calculator that can help you work out how much to pay. You'll need to know your card's minimum payment rules to use it.
It's best to pay off as much as you can afford. If you'd like some help budgeting, we're happy to help.
Visit us in your nearest branch.
Phone
Sundays and bank holidays, 9am to 5pm.
Our automated helpline is available out of hours.
How to make payments to your card
If you bank with us, it's easy to make a payment to your credit card in our app or internet bank. Just select your current account and make a transfer to your credit card.
If you bank with another provider, you'll need these details to make a transfer:
- Sort code: 07-30-12
- Account number: 00001604, and
- The 16-digit number on the front of your credit card (to use as your reference)
If you pay by direct debit, you can increase your payment in the internet bank or by giving us a call. You can also call us to set up a new direct debit.
What to do if you're worried about persistent debt
We understand that it's not always easy to just pay a bit more. If you have any concerns then please get in touch with us.
Phone
Sundays and bank holidays, 9am to 5pm.
Our automated helpline is available out of hours.
Talk to an independent advisor about your debt
We work closely with organisations, like PayPlan and Stepchange, to make sure you can access free help based on your individual situation.
You can speak confidentially with a specialist debt advisor for different types of support including:
- help with debt plans and insolvency
- general debt advice
- money management
- financial wellbeing