What does persistent credit card debt look like and do you have it?

ARE YOU in persistent credit card debt? Are you able to get ahead of your payments and pay more than you need, or are you stuck paying the minimum amount each month?
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There are millions of people in this cycle of credit card debt and the Financial Conduct Authority (FCA) which is the watchdog for the financial industry, has decided that lenders need to do more and act sooner to help them.

The FCA is classifying people who have been paying more towards the interest of their card balance rather than reduce what they owe for a period longer than 18 months as being in persistent credit card debt and it says there are 3.3 million Britons in this position. It is proposing that the card provider should try to help these customers by suggesting that they increase their payments to clear their balance faster. If someone has only been paying the minimum amount for three years, then the FCA is suggesting that lenders propose a repayment plan that’s affordable for the customer. If this still doesn’t work, then lenders should waive or cancel interest and charges.

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Under the new proposals lenders will have to work harder to identify struggling customers and will have to intervene sooner in general to help them. All this follows the recent news that annual spending on credit cards is up by 9.3%, the fastest rate of growth for 11 years.

The FCA has worked out that, if lenders took this approach, then by 2030 customers would have saved between £3 billion and £13 billion, depending on the response to their ideas. Credit card companies have until July to respond to the proposals.

These FCA proposals would create a system where the onus is on the lender to make sure their customers can afford their repayments and their credit card debt doesn’t become long-term and damaging. All this could go a long way in helping people struggling to repay their credit cards, but at the moment they are only suggestions and haven’t become rules.

What lenders do have to do however, is make sure they are treating you fairly. If you know you’re struggling with your credit card repayments, you don’t have to wait for the rules to change or for your lender to get in touch with you to do something about it. Give your lender a ring and explain your situation to them. This is especially important if you’re going to miss payments – you don’t want them to think that you don’t have any intention of repaying the debt, or that you’ve simply forgotten.

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Your lender might be able to give you a payment break, lower your repayments for a while or freeze interest and charges. If you’ve got multiple debts you’re struggling to pay back or if you’re not comfortable speaking to your lenders, you should speak to a trained debt advisor.

Debt Advisory Centre: 0161 871 4881