If you cannot pay your credit card

If you cannot pay your credit card, contact your card provider as soon as you can, ideally before you miss a payment. FCA rules say lenders must treat you with forbearance and due consideration if you are in, or approaching, arrears, which can mean lower payments or a pause on interest and charges. Deal with your priority debts first, and get free, impartial advice if you owe money elsewhere too.

What should you do first?

1. Stop using the card. New spending makes the balance harder to clear.
2. Check your priority debts. Rent, mortgage, council tax and energy come before a credit card. See priority debts.
3. Work out a budget. List your income, essential bills and priority debts. What is left is what you can offer your non-priority creditors.
4. Contact the lender. Explain what has happened, say what you can afford and offer to send your budget. Keep notes of calls and copies of letters.

The FCA’s rules for consumer credit firms, in its Consumer Credit sourcebook (CONC), say a lender must take your individual circumstances into account when deciding how to help. Its examples of forbearance include:

• suspending, reducing, waiving or cancelling further interest or charges
• letting you pay off arrears more slowly, where paying at once would be unaffordable
• accepting no payments, reduced payments or token payments for a reasonable period, if paying would leave you unable to meet priority debts or essential living costs
• agreeing a repayment plan that gives you a reasonable time to repay

A lender must not pressure you to pay in one go or in unreasonably large amounts, to pay within an unreasonably short time, or to sell your property or borrow more to pay. If you tell the lender that you, or a debt adviser, are working on a repayment plan, it must pause active collection for a reasonable period. FCA guidance says this should generally be 30 days, possibly with a further 30 days if the plan is making progress.

What if you can only afford the minimum payment?

For card agreements made on or after 1 April 2011, the minimum payment must at least cover the interest, fees and charges added to your account plus 1% of the balance. That means paying only the minimum clears very little of what you borrowed, and the debt can take many years to repay.

Paying at least the minimum avoids late payment fees and missed payment marks on your credit file. If you can manage that but no more, keep paying and talk to your lender about your options. You can also:

• ask the lender to reduce your credit limit, or to stop offering you limit increases, which it must allow
• expect the lender not to raise your limit if you are at risk of financial difficulties, because FCA rules forbid it

What are the persistent debt rules?

The FCA’s persistent debt rules (CONC 6.7.27R onwards) apply to credit cards and store cards. You are in persistent debt if, over 18 months, you paid more in interest, fees and charges than you repaid of the money you actually borrowed. The rules do not apply if your balance was below £200 at any point in that 18-month period.

The FCA expects the options offered at 36 months to clear the balance over a reasonable period, usually 3 to 4 years. Examples include higher monthly payments or moving the balance to a fixed-sum personal loan. If you say you will pay more but do not, or you do not reply at all, the card will usually be suspended or cancelled.

What happens if you stop paying?

If payments stop and nothing is agreed, this is the usual order of events:

1. Late fees and missed payment marks. These go on your credit file.
2. A notice of arrears. Once you have missed two payments in a row, the lender must send you a formal arrears notice.
3. A default notice. Under the Consumer Credit Act 1974, before a lender can end the agreement or demand the whole balance, it must send a default notice giving you at least 14 days to put things right.
4. A default on your credit file. MoneyHelper says lenders can see a default for six years from the date it is recorded.
5. Debt collection. The debt may be passed or sold to a collector. Collectors have no special powers. See debt collectors in Scotland.
6. Court action. The lender, or whoever now owns the debt, can take you to court. You will receive official court forms, and you can reply: to dispute the debt, or to agree you owe it and ask for time to pay.

If the court decides you owe the money, it grants a decree, a court order to pay. After that, sheriff officers can serve a charge for payment, which usually gives you 14 days to pay, and then use diligence (legal enforcement), such as an earnings arrestment or bank arrestment.

Should you move the debt to a balance transfer card?

A balance transfer moves what you owe to a new card, often with a low or 0% introductory rate. It can reduce interest for a while, but it is new credit, and it needs care:

• there is usually a fee to move the balance
• the introductory rate ends, so check the rate that applies afterwards and how long the offer lasts
• the new lender will usually check your credit file, and missed payments make a refusal more likely
• it only helps if you stop using the old card

The same caution applies to a loan to clear your cards. A loan secured on your home puts your home at risk if you cannot keep up the repayments, and turns a non-priority debt into a priority one. Our guide to debt consolidation explains the risks. If you are already behind, new borrowing can simply move the problem.

Where can you get help?

Free, impartial debt advice is open to everyone in Scotland, from services such as MoneyHelper, Citizens Advice Scotland, Advice Direct Scotland and StepChange. An adviser can look at all your debts, help you prioritise and contact your creditors. See free debt advice in Scotland.

If the lender is not treating you fairly, complain to it first. If you get no final response within 8 weeks, or you are unhappy with the answer, you can take the complaint to the Financial Ombudsman Service, which is free. If you think the lender gave you the card, or raised your limit, without properly checking you could afford it, tell an adviser.

If a credit card is one of several debts you cannot manage, there are informal and formal ways to deal with them in Scotland, each with different costs and consequences. Our overview of Scottish debt solutions sets them out, and an adviser needs to look at your full situation before you choose anything.

Official sources

• FCA Handbook, CONC 6.7 (minimum repayments and persistent debt, CONC 6.7.5R and 6.7.27R to 6.7.40G)
• FCA Handbook, CONC 7.3 (forbearance and treatment of customers in arrears)
• Consumer Credit Act 1974, Part VII (arrears notices and default notices, sections 86C and 87 to 88)
• MoneyHelper: how long does a default stay on your credit file?
• Citizens Advice Scotland: being forced to pay your debts