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.

Example:

Here’s how, by changing payment behaviour, you could pay off debt quickly 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, and the remaining £41.45 covering the interest. This 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 the £100 each month, she’d pay £2,325 less in interest, and clear her debt 10 years and 8 months quicker than if she only made the minimum repayment each month.

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.

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 voluntary payment amount each month, by letter or email. Paying this amount will take you out of persistent debt.

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.

If you're still in persistent debt after 36 months, we'll provide you with options to support you in paying off your balance sooner, such as moving on to a fixed term paydown plan.

We'll suspend your card when we set you up on a paydown plan. If you still have credit available at the time, we may be able to offer you another credit card. This will give you access to some credit.

We want to do all we can to help our members through the cost of living crisis. So we're reducing the interest rate of our paydown plans to 9.9% per annum (effective rate).

We'll review your account again at 39 months.

We'll suspend your card if you're still in persistent debt after 39 months. This is to prevent you from adding more to your balance, which could cost you more and means it takes you longer to pay off your debt.

Once you've paid off your debt, we’ll close your account.

After that, you can apply for a new card with us if you’d like. However, you won't be eligible for any introductory offers if you've had an 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 suspended, 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.

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.

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.

How to make additional payments

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.

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.

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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.

If you bank with us, it's easy to make a payment to your credit card in our Banking 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.

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.

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