Only making minimum credit card payments? What you need to know

Making the minimum payment on your credit card may keep the account up to date, but it doesn’t always mean the debt is under control. Much of each payment can go towards interest and charges, leaving only a small amount to reduce what you originally borrowed. New StepChange research suggests millions of people are finding credit card repayments difficult, while many are relying on cards to cover food, energy, housing and other essential costs.

I understand how easily this can happen because I’ve received persistent debt letters myself. After my business failed, money was extremely tight, and there were periods when making the minimum payment was all I could realistically manage. Being told to pay more didn’t create spare income, which is why any attempt to increase minimum repayments must begin with an honest look at what someone can currently afford.

Why are minimum credit card payments causing concern?

Minimum credit card payments can allow a balance to remain outstanding for many years because they reduce as the amount owed falls. StepChange’s new YouGov polling found that 15% of UK adults, equivalent to more than 8 million people, consider their monthly credit card repayments a fairly or very large burden. The research was based on 2,142 adults surveyed on the 9th and 10th of July, with the results weighted to represent the UK adult population.

The survey also found that 9% of adults had used a credit card to cover essential household bills during the previous three months. StepChange estimates that this represents around 5 million people, with cards being the most commonly used type of credit for those costs. Essential spending in the research included housing, utilities, council tax, groceries, transport and other commitments needed to make ends meet.

Using a credit card for an unexpected cost isn’t automatically a problem when you have a realistic plan to clear it. The difficulty comes when borrowing is repeatedly needed for food or household bills because income no longer covers basic spending. Each new purchase adds to a balance that may already be attracting interest, while the following month brings another set of essential costs.

Credit cards are the UK’s most widely held consumer credit product, with StepChange reporting that two in three adults hold one and one in three have an outstanding balance. The charity is also concerned about the way some credit limits start relatively low and increase as customers use the card more often. For somebody whose finances are deteriorating, a rising credit limit can provide access to more borrowing without addressing whether the larger balance remains affordable.

This supports the case for lenders carrying out stronger checks before increasing somebody’s limit. A person may have been able to afford the card when it was first opened, but their income, rent, energy bills or family circumstances may have changed since then. An automatic increase can deepen the problem when the customer is already relying on credit to cover everyday costs.

What does persistent credit card debt mean?

Persistent credit card debt generally means you’ve paid more in interest, fees and charges than you’ve repaid from the amount borrowed during an 18-month period. The FCA requires lenders to assess accounts regularly and contact customers who meet that definition. The formal rules normally apply where the balance hasn’t fallen below £200 during the relevant period.

This can happen even when you’ve made every required payment on time. Your statement may show that the balance has fallen slightly, yet most of the money you paid may have covered the cost of borrowing rather than the debt itself. That’s why receiving a persistent debt letter doesn’t necessarily mean you’ve missed payments or done anything wrong.

Previous StepChange research estimated that around 2.5 million UK adults were trapped in persistent credit card debt. Its research defined that group as people who believed they’d paid more in interest, fees and charges than they’d reduced their balance by during the previous 18 months. The charity also says 73% of people currently seeking its debt advice have credit card debt, with that proportion increasing this year.

Who is most at risk of persistent credit card debt?

Persistent debt isn’t evenly spread across the population. StepChange estimates that one in four renters with credit card debt is in persistent debt, with renters twice as likely to be affected as people with mortgages. Single parents and people with low financial resilience are also among the groups most likely to struggle.

The figures suggest that persistent debt is often part of a wider household budget problem rather than an isolated credit card issue. StepChange found that eight in ten people in persistent debt find it difficult to keep up with household bills and credit commitments, compared with four in ten UK adults. It also estimates that 36% are in serious problem debt, compared with 7% of adults overall.

How long could minimum credit card payments continue?

Paying only the minimum can turn a fairly ordinary card balance into a commitment lasting well over a decade. MoneyHelper gives the example of a £2,000 balance on a card charging 22% APR, with a minimum payment of 2.5%. Under those assumptions, the debt would take around 14 years to clear when no further spending was added.

The exact result will depend on your balance, interest rate and the way your provider calculates the minimum. Current FCA rules require the minimum on many cards opened since the 1st of April 2011 to cover at least the interest, fees and charges applied to the account, plus 1% of the outstanding balance. Card providers can require more than this, and some set a fixed cash amount whenever the percentage calculation produces a lower figure.

Paying a fixed amount rather than allowing the payment to shrink with the balance can make a noticeable difference. If your minimum falls from £80 to £75, continuing to pay £80 sends the extra £5 towards the debt. That only makes sense when the amount remains affordable after rent, mortgage payments, council tax, energy, food and other priority costs have been covered.

Why do high-interest credit cards make persistent debt worse?

High-interest cards can make persistent debt much more expensive, particularly products aimed at customers with weaker credit histories. StepChange estimates that almost half of people in persistent debt have subprime credit card debt. These cards may carry representative interest rates of 40% APR or more, which means minimum repayments can struggle to reduce the original balance.

In a typical persistent-debt repayment journey, StepChange estimates that somebody borrowing £1,000 at 40% APR could pay almost £1,200 in interest, in addition to repaying the original £1,000. At 60% APR, the interest could rise to around £1,500. These are estimates rather than a prediction for every cardholder, but they show why reducing or freezing interest can sometimes be more useful than simply demanding a higher monthly payment.

What happens when you receive a persistent debt letter?

A persistent debt letter is intended to warn you that your repayments aren’t reducing the balance quickly enough. After 18 months, the provider should explain the cost of continuing with low payments and ask whether you can afford to repay more. If the position continues, lenders may write again and eventually take stronger action to stop the balance remaining in long-term debt.

If the account remains in persistent debt for 36 months, the lender must offer a way to repay it within a reasonable period. That could involve a repayment plan, an increased payment or another arrangement based on the customer’s circumstances. Where someone can’t afford faster repayment, FCA rules require the lender to show forbearance, which may include reducing, suspending, waiving or cancelling interest and charges.

A provider may suspend the card to stop the balance increasing further. Suspension doesn’t remove the debt, and interest may continue unless the lender agrees to reduce or freeze it. Ignoring the letters can make it harder for the provider to offer suitable help, so respond even when you know you can’t afford the amount being suggested.

What was my experience of persistent debt letters?

I received persistent debt letters during a period when my business had failed, and my finances were under severe pressure. I was making minimum credit card payments because that was what I could manage, rather than because I didn’t understand that paying more would reduce the interest. The underlying problem was that there wasn’t enough money available to increase the payment without taking it away from something else.

That experience affects how I view proposals to raise minimum repayments. For someone with spare income, a higher required payment could prevent years of unnecessary interest and help clear the balance sooner. For someone using a credit card to buy food or pay an energy bill, increasing the payment without checking their budget could push them into arrears elsewhere.

A letter needs to do more than tell somebody that their debt is expensive. It should lead to a meaningful conversation about income, essential spending, interest rates and the reasons the balance isn’t falling. Support needs to reflect the person’s current position, which may be very different from when the card was originally approved.

What changes does StepChange want?

StepChange wants the FCA to focus more on preventing persistent credit card debt rather than waiting until someone has been trapped in it for several years. The charity is calling for stronger affordability checks, minimum repayments that prevent balances remaining in long-term debt and earlier support for customers paying high interest. It argues that people unable to meet an increased minimum should be offered help and forbearance instead of being left with an unaffordable demand.

Issue	Current position	What StepChange is calling for
Affordability	Lenders must assess creditworthiness and affordability when offering credit	Clearer rules and stronger checks, particularly for financially vulnerable customers
Minimum repayments	Many cards must charge at least interest, fees and charges plus 1% of the balance	Payments set at a level that prevents persistent debt, where that amount is affordable
Persistent debt intervention	Contact normally begins after 18 months, with stronger action after 36 months	Earlier help before customers spend several years paying mainly interest
Customers who can’t pay more	Lenders must provide forbearance and consider individual circumstances	A safe route out, including support for people on expensive cards who can’t afford faster repayment

The aim of higher minimums would be to reduce the total interest paid and release more income later, once the card has been cleared. The risk is that a larger payment could remove money someone needs today for rent, food, heating or transport. StepChange’s proposal recognises that tension by linking increased minimums with affordability checks and support for anyone unable to pay them.

StepChange says the progress made after the persistent-debt rules were introduced has started to reverse. The proportion of adults in persistent debt initially fell from an estimated 6% to 4%, but later increased again to 5%. The charity believes this shows that the existing rules aren’t preventing enough people from becoming trapped in long-term debt.

It wants the FCA to use the Consumer Duty more actively, requiring lenders to prevent foreseeable harm rather than waiting until the customer has already spent years paying mainly interest. That would include stronger checks before lending or increasing limits, affordable minimum repayments and earlier support for customers whose balances aren’t falling.

Would increasing minimum repayments help?

Increasing minimum repayments would help some borrowers, but it shouldn’t be applied as a blanket solution. Someone paying £60 a month who could comfortably afford £90 may clear the debt much sooner when required to pay the higher amount. Someone whose budget is already short by £30 can’t solve that problem by being told to find another £30.

Checks should be based on the customer’s current financial situation rather than the circumstances they had when opening the account. Credit cards may be held for many years, during which someone can lose a job, separate from a partner, become ill, see a business fail or face higher household costs. A card that was affordable at the beginning can become unmanageable without the customer having borrowed irresponsibly.

Bank of England survey data shows why this matters. Lenders reported that credit card default rates increased during the three months to the end of May and expected them to rise again during the three months to the end of August. The survey reflects lenders’ responses rather than the Bank of England’s own forecast, but it points to continuing pressure on unsecured borrowing.

What other help could lenders offer?

Lenders can consider reducing or freezing interest, waiving charges, arranging affordable payments or allowing more time to repay. FCA rules say firms must consider the customer’s individual circumstances and treat people in or approaching arrears with forbearance and due consideration. The guidance gives suspending, reducing, waiving or cancelling interest and charges as examples where continuing to add them would cause the debt to rise.

I’d also like to see lenders offer suitable customers a lower-rate product or a structured refinancing option when that would genuinely reduce the cost. That shouldn’t mean moving someone into a larger loan or extending the debt for so long that they pay more overall. Any alternative needs to be affordable, clearly explained and based on the complete cost rather than a lower-looking monthly payment.

A temporary breathing period may help when somebody has suffered a short-term income drop and expects their position to recover. During that time, a lender could pause or reduce interest, accept a smaller payment or agree a temporary arrangement. The customer should be told how much interest will continue to build, when normal payments resume and how the arrangement will be reported to credit reference agencies.

Could a balance transfer reduce the interest?

A balance transfer may reduce the interest when you can qualify for a lower-rate or 0% card and afford to clear the balance during the promotional period. Some providers allow an eligibility check using a soft search, which lets you see your chances without adding a full credit application to your report. Transfer fees, the length of the deal and the rate charged afterwards all need to be included when deciding whether it will save money.

This option won’t suit everybody, particularly someone whose credit record has already been affected or whose income makes approval unlikely. Applying repeatedly can make the situation worse because several hard searches may reduce the chance of being accepted elsewhere. A balance transfer also fails when the cleared card is used again, and the person ends up with two balances instead of one.

Refinancing should reduce the cost and create a realistic route to clearing the debt. It shouldn’t simply move the balance to another lender while leaving the underlying budget problem unchanged. Use an eligibility checker where available and avoid applying until you understand the likely fee, repayment needed and end date of the promotional rate.

Will asking for help affect your credit record?

Asking a lender or debt charity for advice doesn’t itself damage your credit record. A reduced-payment arrangement, payment holiday, frozen interest agreement or suspended account may be recorded, depending on what’s agreed and how the lender reports it. MoneyHelper advises customers to ask about the credit-file effect before accepting any temporary plan.

It would be better if short-term support could always be provided without making future borrowing harder, particularly when a customer asks for help before missing a payment. Current reporting practices don’t guarantee that outcome, so it would be misleading to promise that an arrangement will leave the credit file untouched. An agreed payment arrangement is usually less damaging than repeatedly missing payments without contacting the lender.

Freezing interest may also require the card to be suspended, and StepChange warns that this can affect the credit file. That doesn’t automatically mean accepting help is the wrong choice, because preventing the balance from growing may be more important than protecting a credit score. Ask the lender to explain exactly what will be reported, how long it may remain visible and whether other support options are available.

What should you do if you can’t afford a higher payment?

Tell your card provider as soon as you know that the current payment, or a proposed increase, is unaffordable. Write down your monthly income and essential costs before speaking to them, because this helps show what you can realistically pay. Don’t agree to an amount that leaves you unable to cover rent, mortgage payments, council tax, food, energy or other priority commitments.

Ask whether the provider can reduce or freeze interest, waive charges or set an affordable temporary payment. Find out whether the card will be suspended, whether interest will continue and what will be recorded on your credit report. Keep notes of the conversation and ask for the arrangement in writing.

You can also contact StepChange Debt Charity for free debt advice. The charity has warned that imposter businesses sometimes appear in online adverts, so use StepChange’s official website rather than relying on an advert or an unsolicited call. Its official helpline is 0800 138 1111, and its advice is free.

This article provides general information rather than personalised financial or debt advice. Your best option will depend on your income, household costs, other debts, assets and the terms of your credit agreement. Getting advice early gives you more opportunity to consider the available choices before missed payments or further borrowing narrow them.

Are the current credit card rules strong enough?

The current rules recognise persistent debt, but StepChange believes they wait too long before requiring meaningful intervention. A customer can spend 18 months paying more in interest and charges than they reduce the balance by, then remain in that position for another 18 months before the strongest protections apply. By that point, the person may have spent three years losing disposable income to an expensive balance.

My view is that minimum repayments should rise when a proper affordability check shows the customer can pay more. When they can’t, the response should be lower interest, a temporary freeze, an affordable plan or another route that reduces the cost without creating an impossible demand. Telling somebody to pay more when they don’t have the money may move the problem elsewhere, leading to missed rent, unpaid energy bills or fresh borrowing.

If you’re currently paying only the minimum, look at how much of the payment reduces your balance and how much goes towards interest. Pay more when your budget genuinely allows it, even if the extra amount is small, but don’t sacrifice priority bills to satisfy an unaffordable request. When the numbers no longer work, speak to the lender and a free debt adviser before the next letter arrives.

Frequently asked questions

What is persistent credit card debt?

Persistent credit card debt generally means you’ve paid more in interest, fees and charges than you’ve repaid from the borrowed balance during an 18-month period. Your card provider should contact you when its assessment shows that your account meets the FCA definition.

Is paying only the minimum bad for your credit score?

Making the minimum payment on time prevents the account being recorded as a missed payment, but lenders may still consider your balance, credit use and repayment pattern when assessing you. Persistent debt can eventually lead to the card being suspended or an arrangement being recorded.

What happens after 18 months of minimum payments?

Your provider should write to explain that you’re in persistent debt and encourage you to increase your payments when affordable. It should also explain the possible consequences if the pattern continues.

Can a credit card company increase your minimum payment?

A credit card provider can propose a higher payment or repayment plan when your account remains in persistent debt. It must consider affordability and should offer forbearance when you can’t afford to repay faster.

Can a credit card company freeze interest?

A lender can agree to reduce, suspend, waive or cancel interest and charges when that is appropriate for your circumstances. This isn’t automatic, and the arrangement may involve suspending the card or recording support on your credit file.

What should you do if you can’t afford the minimum payment?

Contact the lender before missing the payment and explain what you can afford after essential household costs. You can also seek free debt advice from StepChange, National Debtline, Citizens Advice or MoneyHelper.

How long does it take to clear a credit card by paying the minimum?

It depends on the balance, APR and minimum-payment calculation, but it can take many years. MoneyHelper estimates that a typical £2,000 balance at 22% APR could take around 14 years to clear when only the minimum is paid.