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Credit card debt

Credit card debt. What to do if you've got credit card arrears.

Credit cards are a popular way to buy items in shops and online and pay the money back in instalments later.

Used wisely they can be useful, but if you’re not careful they can be an expensive way to borrow and can take a very long time to repay.

In this section you’ll find advice about how to pay off credit card debt. We'll also highlight what you can do to help manage your credit card debt.

Have you received a letter from your lender warning you that your account is in 'persistent debt'? We can help you. Read our guide and contact our team.

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What happens if I have credit card arrears?

If you don't pay the minimum payment every month, your account will go into arrears. Your creditor will contact you to demand the missing payments are made, and if you don't do this eventually the account will default and further action may be taken.

For more information on what action a credit card provider can take to collect a debt, see our section on what your creditors can do.

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Joint credit card debt

The law only allows a credit card account to be in one name, so there's no such thing as a joint credit card. But your credit card provider may let you have a second credit card for your partner or someone else to use.

If your card provider has given you a second card, you will be liable for all of the money spent on both cards.

The second card holder is not liable for any of the debt, even the money spent on the card with their name on it.

For this reason, we recommend you think very carefully before asking for a second card.

What if I make just the minimum payment?

All credit cards have a minimum amount you must pay back each month.

This will be a percentage of the amount you owe, usually between 1% and 3% each month. Normally, there'll be a minimum amount of £5.

If your payments cover more interest and charges than your actual credit card balance for 18 months or longer, this is classed as a ‘persistent debt’.

If you have a persistent debt, your credit card company will write to you and ask you to increase your monthly payment. Some credit card companies are changing their terms and conditions (T&C’s) to increase the minimum payment  in order to get customers out of persistent debt.

By understanding your budget, you may find that you’re able to pay off your credit card quicker at a rate you can afford.

Are you in control of your repayments? Click here for our 60-second repayment checker.

Credit card limits

Some cards are aimed at people with a poor credit history and have a low limit of £200 or so. Often these cards have a high interest rate, but if you pay them back on time, they can be a good way to boost your credit rating by showing other creditors that you can be trusted.

Other cards have a much higher limit which can go into the thousands. Whether you have a low or high credit limit, it's very easy to run up affordable debts which will take a long time to pay back.

Sometimes your card provider will offer to increase your credit limit, especially if you have a good history of payments. You should think very carefully before agreeing to an increase in your credit limit, and refuse the increase if you don't need it. Some people like a higher limit 'just in case', but there's always the temptation to keep spending and run up a debt you eventually can't afford to pay back.

How expensive are credit cards?

Interest on credit cards varies from less than 10% to 70% or more. The rate of interest you're charged will usually depend on the card you have, which is often determined by your credit rating.

Some cards give you an interest-free period of up to 60 days on purchases. This means if you buy something and pay off the whole amount within this time you won't be charged any interest.

But some card providers charge interest on purchases straight away, and most will charge interest straight away on money you withdraw from a cash machine.

If you miss payments, you'll get late payment charges on top of the interest. These should be no more than £12 for each missed payment.

What is a credit card balance transfer?

Some credit cards let you transfer the balance from another card. Transferring a debt from a card with a high rate of interest to one with low or 0% interest could help you pay off the debt faster.

But low or 0% interest credit cards are hard to get if you don’t have a good credit rating. This means you can’t rely on balance transfers as a way to deal with your credit card debts.

Also look out for fees when transferring a balance. Most credit card providers charge 2-3% of the amount you’re transferring as a one-off fee. If you’re transferring a balance to take advantage of a lower interest rate, the fees may mean you save less than you expect.

If you do transfer a balance, make sure you cut up the old credit card and close the account. Otherwise, you may be tempted to keep spending on both cards and you’ll end up with two debts.

How does a credit card affect my credit file?

Your credit card provider will share information with credit reference agencies about the way you use your card. This information will help other creditors decide how risky it is to lend money to you.

Like all debts, your credit file will show information about your credit card debts:

  • The balance owed
  • Your payment history
  • Whether your account has defaulted

But credit card providers also share extra information on your credit file which other types of debt don’t show, including:

  • Your credit limit
  • How much you’ve spent each month
  • How much money you’ve withdrawn from a cash machine each month

Credit card debt advice

If you’re struggling to cover the minimum payments on your credit card, it’s time to get free, expert debt advice. Contact us (free from all landlines and mobiles) or try our online debt advice tool.