Credit Card Minimum Payments and Persistent Debt Explained
The minimum payment is the smallest amount you must pay each month to keep your account in good standing. It's a useful safety net, but if it's all you ever pay, a balance can take years to clear and cost far more in interest.
Key takeaways
- Paying at least the minimum on time avoids late fees and protects your credit file.
- Paying only the minimum means most of your payment can go on interest.
- Under FCA rules, you're in persistent debt if, over 18 months, you've paid more in interest, fees and charges than you've repaid of the balance itself.
- Your provider must then contact you and, if it continues, offer help to repay faster.
- Free, confidential debt advice is available through MoneyHelper.
This is general information, not financial advice.
What is the minimum payment?
Your statement shows a minimum payment and a due date. The minimum is usually worked out from a small percentage of your balance plus that month's interest and any fees, or a fixed amount for small balances. The exact formula is in your credit agreement.
Paying at least this amount on time means:
- no late payment fee
- no missed payment marked on your credit file
- you keep any 0% promotional deal (missing a payment can end it).
Why paying only the minimum is costly
Because the minimum includes that month's interest, a large share of each payment may go on interest rather than the debt itself. As your balance falls, the minimum often falls too, so repayment slows down further.
Your statement usually shows an estimate of how long it would take to clear your balance by paying only the minimum, and what it would cost. It's worth reading.
What helps:
- set a fixed monthly amount above the minimum, rather than letting the payment shrink
- set up a direct debit for at least the minimum as a safety net, and pay extra on top
- stop adding new spending to the card while you pay it down.
What is persistent debt?
The FCA introduced persistent debt rules after its credit card market study. Your account is in persistent debt if, over the previous 18 months, you've paid more in interest, fees and charges than you've repaid of the actual borrowing.
What your provider must do
- At 18 months: contact you, explain that paying more would reduce the cost and help clear the debt sooner, and give details of free debt advice.
- At around 27 months: if you're still on track to be in persistent debt, contact you again.
- At 36 months: offer you reasonable ways to repay the balance faster, usually over three to four years. If you can't afford that, the provider must treat you with forbearance, which can include reducing, waiving or cancelling interest or charges.
The provider can suspend or cancel your card if you don't respond or can't take up its options.
If you get a persistent debt letter
Don't ignore it. It isn't a penalty. It's a prompt to make a plan.
- Look at your budget and see whether you can afford to pay more each month.
- Contact your provider to discuss your options.
- Consider free debt advice, especially if you have several debts.
Minimum payments and 0% deals
On a 0% balance transfer or purchase card, the minimum payment is often small because no interest is being added. That's helpful, but it can lull you into paying too little. When the promotional period ends, whatever is left starts being charged at the standard rate.
A simple fix is to divide your balance by the number of 0% months left and pay at least that amount each month. If that isn't affordable, pay what you can and plan ahead for the end date. See What Happens When Your 0% Credit Card Deal Ends?
Ways to clear card debt faster
Pay more than the minimum
Even a modest increase can shorten the time to repay and reduce interest.
Use a 0% balance transfer
If your credit history allows, moving the debt to a 0% card means more of each payment goes on the balance. See How Do Balance Transfers Work? A Plain-English UK Guide and Balance transfer credit cards.
Compare a personal loan
A loan has fixed repayments and an end date, which some people find easier to stick to. See Balance Transfer vs Personal Loan: Which Is Better for Clearing Debt?
Tackle the most expensive debt first
If you have several cards, putting extra money towards the highest-rate one first usually saves the most.
If you're struggling
If you can't make even the minimum payment:
- Contact your provider early. FCA rules require firms to treat customers in financial difficulty fairly.
- Get free advice. MoneyHelper's debt advice locator can point you to free, confidential services online, by phone or face to face.
- Avoid paid debt "fixers" that charge for help you can get free.
Frequently asked questions
What happens if I miss a minimum payment?
You'll usually be charged a late fee, it may be recorded on your credit file, and you could lose any promotional rate.
Does paying the minimum hurt my credit score?
Paying on time helps your payment history. But lenders may also look at whether balances stay high for long periods, so paying down debt is generally viewed positively.
What does a persistent debt letter mean?
It means that over the last 18 months you've paid more in interest, fees and charges than you've repaid of the balance. It's a prompt to pay more if you can, or to get help.
Can my card be suspended for persistent debt?
After 36 months, if you don't respond or can't take up the repayment options offered, the provider can suspend or cancel the card.
Will a persistent debt plan affect my credit file?
It may, depending on the arrangement. Ask your provider how any plan will be reported before you agree.
This is general information, not financial advice. If you're worried about debt, MoneyHelper offers free, confidential guidance.
