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Credit card debt

Credit card debt. What to do if you can't pay

Credit cards are covered by the Consumer Credit Act (CCA). This means there are strict rules your creditors must follow if you’re struggling to pay your credit card bills.

Used wisely, credit cards can be helpful. But if you’re not careful they can be an expensive way to borrow, especially when it takes a long time to pay off what you owe if you can't pay the balance.

Worrying about credit card bills could be a sign you need debt help

We can help if you’re in debt. You can get free and confidential debt advice online now. We’ll recommend the best way to deal with any debts you have, and also tell you about other organisations who can support you.

Also, if you’re eligible, you could get Breathing Space. This means your creditors won't be able to add interest or fees to your debts, or take enforcement action, for up to 60 days.

In this section you’ll find advice about:

  • what to do if you’re struggling to pay credit card bills
  • what your credit card company will do about regular missed or minimum payments
  • how to transfer balances to pay off credit card debt
  • how your credit card can affect your credit score or file
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Frequently asked questions

What happens if I can’t pay credit card bills?

If you don't pay the minimum payment your account will go into arrears. If this happens:

  1. Your lender will contact you to demand the missing payments are made
  2. Then if you don’t make the payments they ask for, the account will default
  3. And if you still don’t pay, further action may be taken, such as employing debt collection agents to recover the money you owe them

For more information on what action a credit card provider can take to collect a debt, read our guides to:

cog iconHave you received a letter from your lender warning you that your account is in 'persistent debt'? Find out what this means and what you should do.

Help with credit card debt

To support customers who are struggling with their finances, creditors may be able to help by:

  • Offering credit card payment holidays for up to three months
  • Ensuring your credit rating won’t be affected if you use a payment holiday
  • Increasing credit card limits – it’s important to consider the longer-term impact this could have on your credit file. Be aware that if you’re on a debt solution, taking out extra credit could go against the terms of your agreement. Always speak to your debt solution provider before considering this as an option

How do I pay off my credit card debt?

  1. Start by understanding your finances, so you know what you can afford to pay each month. Work out your budget by listing your income and spending (without using further credit) and turn this into a monthly plan you can follow.
  2. Use this budget to set aside an amount to repay your credit cards, or ideally to save up for an emergency fund. It can help to transfer this amount to a separate bank account.
  3. Stop using your credit card, even if this is just for a short time. It’s much harder to pay off if the amount you owe keeps growing.
  4. Make sure you’re on top of your ‘priority bills’. These include council tax and any fines you might have. If you fall behind with them, you're at risk of visits from enforcement agents
  5. Get free debt help if you’re not sure what to do. We’re here to help you out with your budget, advise you about different solutions (including debt consolidation) and set up a repayment plan, if that’s the right option for you.

Can you go to jail for credit card debt?

While this is something a lot of people worry about, the risk of a prison sentence for unpaid debts is very rare. It’s only a possibility for certain types of debt, including criminal fines and government debts, and this is a last resort after other types of debt collection have been explored.

Credit card debt, along with most common forms of credit, isn’t enforced by the threat of imprisonment. If a creditor threatens you with this, you should consider making a complaint about them. Find out more about the types of debt that could lead to a prison sentence.

Can you negotiate credit card debt?

If you’re falling behind with payments, it’s often a good idea to contact your credit card provider to explain what’s happening and tell them how much you can afford to pay each month. Many creditors will agree to an affordable repayment plan or a payment holiday to help you get back on track, even if this is only for a few months

A debt management plan is a way of making affordable monthly payments. Work out how much you have left over after essential household spending, then offer a share of this amount to your creditors.

Some creditors will accept a ‘full and final settlement’ to pay off debts that is less than the total amount owed, if you have the funds available to make a prompt payment.

How does a credit card affect my credit score?

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

Credit files state the balance owed, your payment history and if the account has defaulted. Credit card providers give extra information to the credit file companies, including:

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

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'll be liable for all 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.

Minimum credit card payments

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 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 faster at a rate you can afford.

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Credit card limits

Some cards are available for people with a bad 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 unaffordable 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. If your card provider increases your limit without check on affordability, this could be grounds for a complaint.

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.

Interest on credit cards

Interest on credit cards, also called the APR, 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.

Credit card balance transfers

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 harder to get if you don’t have a good credit rating. This means you can’t rely on balance transfers as a way of dealing 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.

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