Chapter 03 · Financial harm
The FCA defines persistent debt as paying more in interest, fees and charges than in repayment of the balance over 18 months.1
Progress has stalled: around 6% of UK adults were in persistent debt when the rules were introduced, falling to 4% by 2022, and rising to 5% by 2024.2 Today, StepChange estimates 2.5 million people are in persistent credit card debt.3
It is concentrated where access to credit can be the most expensive:
Almost half (46%) of those in persistent debt have sub-prime card debt (cards for people with poor or limited credit histories, typically with higher APRs and lower limits. Credit builder credit cards also fall into this group).
One in three (34%) people borrowing on a sub-prime card is in persistent debt, against one in ten (9%) using only mainstream cards.
40% of sub-prime cardholders systematically pay the minimum or less, and 66% report struggling to keep up with bills and credit commitments.4
46%
of people in persistent debt have sub-prime credit card debt.
Almost half
34%
of sub-prime card borrowers are in persistent debt
against one in ten (9%) using only mainstream cards
40%
of sub-prime cardholders struggle to keep up with bills and credit commitments.
and 66% report struggling to keep up with bills and credit commitments
In its 2016 market study the FCA found that a quarter of cards in the higher risk segment opened in 2013 were in severe or serious arrears a year later, and that customers making repeated minimum payments “are profitable, and most firms do not routinely intervene”.5 Although the persistent debt rules that followed were a sensible response, a decade on, StepChange’s assessment is that they manage the harm after it has happened rather than preventing it.
1 Financial Conduct Authority (2018) FCA Handbook, CONC 6.7.27R.
2 Financial Conduct Authority (2024) Financial Lives 2024 survey: Credit & loans.
3 StepChange (2026) Policy briefing: Credit cards, financial difficulty and persistent debt.
4 StepChange (2026) Policy briefing: Credit cards, financial difficulty and persistent debt.
5 Financial Conduct Authority (2016) MS14/6.3 Credit card market study: Final findings report.
The standard advice to anyone building a credit history is well known. Take a card, use it a little, repay it in full every month. Followed to the letter, that advice works. The borrower pays no interest, builds a record of repayment and moves on to better products.
Yet the business model behind these products relies on different behaviours. Credit card issuers largely earn money in two ways: a small fee on each purchase, and interest on balances that are not repaid. Since 2015, the fee on consumer credit card purchases has been capped at 0.3%. On £1,000 of spending that is £3. The same £1,000 revolved for a year at 39.9% earns around £400. A customer who follows the advice and clears the balance every month generates almost nothing for the issuer.
Published results across 2025 and 2026 from major UK specialist card issuers illustrate the importance of interest income to their business models. Reported annual interest income ranges from roughly £400m to over £1bn. In one case, net interest income accounts for over 90% of total income; in another, interest income is more than 15 times fee and commission income. Portfolio APRs can approach 40%, excluding promotional offers, while increasing interest-bearing balances is cited as a driver of growth.
Across the market, 48% of outstanding UK credit card balances now bear interest, up from 42% when the FCA began its market study in 2015.6
While the advice given to new borrowers depends on them never revolving a balance, the viability of the product they are advised to use depends on a large share of its customers doing exactly that.
None of this changes our view that credit cards have an important place in the financial ecosystem. Purchase protection, interest-free periods and flexible repayment are valuable to people who understand them and can afford to use them well. The question we are raising is whether the historic advice to use these products is still appropriate for the least experienced, and potentially most financially vulnerable, members of society, when the products most readily available to them carry the highest rates and the lowest minimum payments.
Access to these products is not guaranteed. Across the whole market, one in five credit card applicants were declined in the two years to May 2024, and the FCA estimates that 16.6 million adults experienced some form of problem accessing credit, whether declined, priced out or deterred from applying.7 For the cards marketed to people with thin or impaired files, this is likely significantly higher. So even where a high cost card might be suitable, many people who need to build a credit history cannot rely on getting one.
Beyond access, we believe someone new to credit, or returning to it, should have the opportunity to:
build their understanding and behaviours before carrying balances at high interest rates;
build their confidence through products with limited exposure to runaway balances;
evidence a track record of repayment behaviour that lenders can see and reward with appropriate risk based pricing; and
be encouraged to build savings, so that they finish in a stronger financial position than they started.
Our members suggest this works. Among thin file members, credit card holding rose from around 15% to over 46% within two years, while average balances in the first year stayed broadly stable at around £450. They arrived in the credit card market with a track record, a savings habit and a better understanding of what they were taking on.
Chapter 01
Chapter 02
Chapter 03
Chapter 04
Chapter 05
Chapter 06
Loqbox Impact Report 2026
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