What does a persistent debt letter mean?

The 18-month test

Persistent debt means that, over the previous 18 months, you have paid more in interest, fees and charges than you have repaid of the amount borrowed. Having a balance for 18 months does not by itself meet that definition.

A simple illustration

Suppose someone pays £900 over 18 months. If £550 covers interest, fees and charges and £350 repays the borrowed amount, more has gone towards borrowing costs than principal. That illustrates the definition.

Those figures are made up for this example. They are not a typical customer’s bill or an estimate for your account. Your provider uses your own history.

Why the provider contacts you

The rules aim to prompt action where repayment is making slow progress. The provider may ask you to consider paying more. If the situation continues, further contact and a repayment proposal can follow; National Debtline explains the 18-, 27- and 36-month stages. A card can be suspended in some circumstances.

Read what this letter asks

Look for the period covered, any response date and the contact details. Does it ask you to increase payments, get in touch or consider a proposed plan? Those are different requests.

If the figures do not make sense, ask how much went towards interest and charges and how much reduced the borrowed amount. You can also ask whether a recent payment has been included.

If a higher payment is unaffordable

Tell the provider that. A suggestion in a letter does not make room in your household budget. Explain changes in income or essential costs and ask about support.

Before agreeing to an arrangement, ask how interest, fees, card use and credit reporting would be affected. Get the terms in writing. MoneyHelper explains that support may be available where you cannot increase payments.

Prepare for the conversation

Put the letter beside your statement and a rough budget. Write down the two or three points you want answered; it is easy to forget them when a call becomes stressful. Record the agreed next step and its date.

For help beyond this one card, use MoneyHelper’s free debt advice locator. It can point you towards support appropriate to your location and needs.