Credit card minimum payments and persistent debt: what the FCA rules require
Published · 5 min read · Figures checked . UK rules and rates change, so check the official sources below before you act.
Paying only the minimum on a credit card can leave a balance barely moving. This guide explains the minimum payment rule, what the Financial Conduct Authority calls persistent debt, and the steps card firms must then take.
What the minimum payment is
A credit card minimum payment is the smallest amount you must pay each month to keep the account in good order. Under the Financial Conduct Authority's rules (the FCA is the regulator for UK consumer credit, and its rulebook is the FCA Handbook), a card firm must set the minimum at no less than the interest, fees and charges added to the account that month, plus a percentage of the amount outstanding. The Handbook rule, CONC 6.7.5R, does not fix that percentage in the text we read, so each card agreement sets its own figure. The point of the rule is that the minimum should always cover the cost of borrowing and chip away at the balance, so the debt does not grow on its own. It is a floor, not a target, and missed or late payments can bring charges and be recorded on your credit file.
Paying more than the minimum
The same rulebook gives you flexibility. CONC 6.7.6R says that where you pay by an automated method such as a Direct Debit, the firm must let you choose to pay any amount that is at least the minimum but less than the full balance. So you are not locked into the minimum or the full balance. If you have more than one balance on a card, such as purchases and a cash advance at different rates, CONC 6.7.4R says a payment above the minimum must first go towards the debt with the highest interest rate.
What persistent debt means
Persistent debt is the FCA's term for a balance that is not really going down. Under CONC 6.7.27R, the test is whether, over the previous 18 months, the payments you made have repaid a lower amount of principal than the interest, fees and charges added. Principal means only the money you actually borrowed, not the interest and charges added to it. The firm must check this at least once a month. The test is not applied if the balance was below £200 at any point in the 18 months, if the firm has already contacted you in the previous 18 months, if the firm is already offering forbearance (a concession such as reduced or paused payments) or better, or if a Breathing Space moratorium applies.
A worked example
This is an illustration with made-up figures, not a forecast. Suppose a card has a £2,000 balance and the interest and charges come to £40 each month, and for simplicity assume that stays constant and no new spending is added. If the cardholder pays £50 a month, then over 18 months they pay 18 x £50 = £900. Interest and charges over the same period are 18 x £40 = £720, so only £900 - £720 = £180 of the payments went towards principal. Because £180 is lower than £720, the account would meet the persistent debt test. If instead they paid £90 a month, they would pay 18 x £90 = £1,620, of which £720 is interest, leaving £900 for principal, which is higher than £720, so the test would not be met. In practice interest falls as the balance falls, so real figures differ and your statement is the place to check.
What the card firm must do
The Handbook sets a sequence. First, when the 18 month test is met, the firm must tell you in plain language that you have repaid less principal than interest, explain that paying more would cut the cost and the time to repay, encourage you to discuss your circumstances, warn what happens if the pattern continues, and give details of not-for-profit debt advice. Between nine and ten months later (CONC 6.7.29R) it reviews your payments and, if the pattern is likely to continue, repeats the message. If the position is still the same over the following 18 months, which is about three years in total, the firm must take reasonable steps to help you repay faster without harming your finances, for example by agreeing a higher repayment plan or moving the balance to a fixed-sum loan. The FCA expects a reasonable repayment period to be usually three to four years.
If you cannot pay more
The rules also cover people who cannot afford to pay more. If you tell the firm the options are unsustainable, or your payments show you are unlikely to repay within a reasonable period, CONC 6.7.37R requires the firm to give forbearance and due consideration. The Handbook says this may include reducing or waiving interest, fees or charges. If you do not respond at all, the firm must suspend or cancel use of the card at the end of the period, and the Handbook generally expects suspension or cancellation in forbearance cases too, unless that would seriously affect essential spending. Citizens Advice, whose page on struggling with credit card payments was last reviewed in September 2022, says that if you cannot meet a suggested plan, it can help to tell the lender what you can afford, or that you cannot pay at all, and to ask it to stop charging interest and fees.
Who this applies to, and who it does not
These rules apply to regulated credit card and retail revolving credit agreements, such as store cards, held by individuals in the UK, because the FCA regulates consumer credit across England, Scotland, Wales and Northern Ireland. They do not describe how every lender must treat every borrower in every situation, and the Handbook says the persistent debt steps do not reduce a firm's wider duties to treat customers in arrears fairly. They do not cover business cards. Debt advice from the organisations below is free, and can look at all of your debts together rather than the one card.
- If you are unhappy with its final response, you can take the complaint to the Financial Ombudsman Service within 6 months, and the service is free.
- Free, impartial debt help is available from Citizens Advice, MoneyHelper, StepChange and National Debtline.
Check before you act
Rules, rates and card terms change, and each card agreement has its own minimum payment formula. Check your statement and confirm the details on the official pages linked below before making any decision about your own card.
Sources
For information only. See our disclaimer and editorial standards. Spotted an error? Tell us.
