Persistent Debt new Credit Card Rules

Anthorn

Dandytf wrote: »

Thanks- I've only missed that as in my experience Aqua haven't yet chosen to add numbers in addition to minimum payment, I guess there's time for this to happen.

Maybe small increase in DD's I have made helps avoid any additional Aqua requests.

I'm sketchy on it myself. As I understand it persistent debt is where over a period of 18 months the balance/amount owed has not reduced. So therefore where cardholders only pay the minimum payment that would apply to high APR cards such as Aqua, Vanquis etc. But I don't see or cannot find any value attached to the balance reduction in the FCA Persistent Debt rules.

What I don't understand is when new purchases are added. For example where I take extended rolling credit for higher value purchases it's never for more than 6 months. So therefore if I make a purchase and pay it back over 6 months and I do that three times more then over 18 months the balance has not reduced.

SwanJon

Anthorn wrote: »

I'm sketchy on it myself. As I understand it persistent debt is where over a period of 18 months the balance/amount owed has not reduced.

From the link above

When a customer has paid more in interest, fees and charges than they have repaid of their borrowing

So if you have paid £180 over the last 18 months, but the balance has only gone down by £89 (so £91 has gone to interest, fees and charges).

Ergates

Anthorn wrote: »

What I don't understand is when new purchases are added. For example where I take extended rolling credit for higher value purchases it's never for more than 6 months. So therefore if I make a purchase and pay it back over 6 months and I do that three times more then over 18 months the balance has not reduced.

Only in so far as new purchases contribute to the interest owed. However, if you've payed back the initial purchase over 6 months (or 18) then you must have been paying more off the balance than towards interest (otherwise it'd take a lot longer to clear), so you wouldn't be in persistent debt.

Also - an additional criteria for persistent debt is that the balance on the card must remain above £200 for the whole 18 month period. Therefore, if you've cleared the initial purchase (down to <£200) before making the second, you wouldn't be in persistent debt either.

Dandytf

I could get caught with these new rules.
As I have my doors cash withdrawal+tech purchases on 1 aqua card.
I know Apr is high 30's
Maybe I should work out if interest is exceeding what I have been paying off.
Though I thought that was the idea of minimum payments anyway.

Willing2Learn

Just got my new Amazon credit card and it does not allow 'minimum contractual payments' to be set up online. All other options are available online. To set up 'minimum contractual payments' you have to speak to an advisor on the phone, who talks a lot of spiel about how long it take to repay blah blah blah...

Tigers

A warning: I don't think companies are applying the persistent debt rules correctly.
I just had another contact from a credit card company saying that my account is in persistent debt yet the account has been closed for years.
So the only charges have been interest charges and the monthly payments are always more than those and so the balance has been steadily reducing - how can it be in persistent debt?
This makes 2 companies who I believe are not correctly applying the rules.
Has anyone else has this issue?

stevenhp1987

Tigers wrote: »

A warning: I don't think companies are applying the persistent debt rules correctly.
I just had another contact from a credit card company saying that my account is in persistent debt yet the account has been closed for years.
So the only charges have been interest charges and the monthly payments are always more than those and so the balance has been steadily reducing - how can it be in persistent debt?
This makes 2 companies who I believe are not correctly applying the rules.
Has anyone else has this issue?

You make zero sense.

You start by saying it's been closed for years then go on to say that you're charged interest and that the balance is steadily (I read slowly) reducing.

It sounds like, you're paying over an extended period of time. If it's been years and it's slowly reducing, it sounds like persistent debt to me.

Tigers

stevenhp1987 wrote: »

You make zero sense.

You start by saying it's been closed for years then go on to say that you're charged interest and that the balance is steadily (I read slowly) reducing.

It sounds like, you're paying over an extended period of time. If it's been years and it's slowly reducing, it sounds like persistent debt to me.

Ok I thought that made sense...
When the accounts were closed they had a balance which I have been paying off and on which interest is charged.


The FCA definition of persistent debt is 'the customer has paid more in interest and charges that they have repaid of their borrowing over an 18 month period'.


On both accounts I have repaid more than I have been charged in interest eg on 1 account, my last annual statement (from August 2017 to August 2018), I paid £249.69 interest and repaid £572.
So my balance reduced by £322.31.


But you're saying this means the account is in persistent debt? That would suggest ANY loan account is in persistent debt as the payments are reducing the loan balance but there is still debt...

stevenhp1987

Tigers wrote: »

Ok I thought that made sense...
When the accounts were closed they had a balance which I have been paying off and on which interest is charged.


The FCA definition of persistent debt is 'the customer has paid more in interest and charges that they have repaid of their borrowing over an 18 month period'.


On both accounts I have repaid more than I have been charged in interest eg on 1 account, my last annual statement (from August 2017 to August 2018), I paid £249.69 interest and repaid £572.
So my balance reduced by £322.31.


But you're saying this means the account is in persistent debt? That would suggest ANY loan account is in persistent debt as the payments are reducing the loan balance but there is still debt...

Loans have a set end-date.

What is the current balance and APR of your card? While it may not "technically" meet FCA's definition of persistent debt, that is quite a high interest payment per month which could be reduced by over-payments or by shifting the debt.

Tigers

stevenhp1987 wrote: »

Loans have a set end-date.

What is the current balance and APR of your card? While it may not "technically" meet FCA's definition of persistent debt, that is quite a high interest payment per month which could be reduced by over-payments or by shifting the debt.

As the credit card accounts are closed and so I can't use them, they also have an end date when the balance will be paid off...
(The interest rate was set when the accounts were closed and so cannot change).


I thought I posted a valid warning that I believe some credit card companies may not be applying the persistent debt rules correctly so people could check and be aware.


I'm not going to give details about the APR and balances - I am happy with the way I am paying off the cards.


What I am not happy about is if the companies are incorrectly applying rules brought in by the FCA.