What happens if you can't pay your credit card UK?
UK Token Payments: 8 Steps to Manage Debt Repayments
Struggling with debt repayments? Start here.
When money gets tight, it can feel like every bill is shouting at you at once.
The credit card wants its minimum payment. The loan payment is due. The overdraft is creeping up. Then the normal household bills land as well: rent, council tax, food, energy, water, travel and everything else life throws at you.
If you cannot afford your normal unsecured debt repayments, the answer is not to panic or ignore the problem. The first step is to work out what you can realistically afford after your priority bills and essential living costs.
That is where token payments can help.
A token payment is a small, affordable payment offered to a creditor when you cannot afford the normal payment. It is not about paying what they want. It is about paying what you can afford while you explain your financial difficulty and try to get things under control.
This guide walks you through the Token Payment Method in eight practical steps.
Quick answer: what are token payments?
Token payments are small, affordable payments made to creditors when you cannot afford your normal unsecured debt repayments.
They are usually used when paying the normal amount would leave you unable to cover priority debts or essential living costs, such as rent, mortgage, council tax, food and utility bills.
FCA rules say accepting no payments, reduced payments or token payments for a reasonable period can be an example of treating a customer with forbearance and due consideration.
Token payments are not a magic fix. They can still affect your credit file, and interest or charges may need to be discussed with the creditor. But they can help you stay engaged, show that you are trying, and avoid making unaffordable promises.
Useful tools before you start
Before you write to creditors or offer token payments, these pages may help:
- Use the TRDG Budget Planner to see what is really left after essential costs.
- Read How to Get Out of Debt in the UK if you need a wider plan.
- Read Should You Call or Write to a Debt Collector in the UK? If you are not sure how to communicate.
- Read How to Deal with Debt Collectors in the UK if the debt has already been passed to a collector.
Token payments work best when they are based on a proper budget, not a guess.
Need help working out what to offer?
If you are unsure what to say to a creditor or if you do not know what payment is realistic, book a 10-minute clarity call. We can help you understand the next sensible step before you agree to anything.
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Who can use token payments?
Token payments are usually relevant when you are dealing with unsecured consumer credit debts and you cannot afford the normal repayments.
Examples may include:
- Credit cards.
- Personal loans.
- Store cards.
- Catalogue accounts.
- Overdrafts.
- Some buy now, pay later debts.
- Payday loans.
The important point is this: token payments are not for priority bills such as rent, mortgage, council tax, gas, electricity or court fines.
Priority bills need to be dealt with first because the consequences of missing them can be more serious. Once you know your priority bills and essential living costs are covered, you can work out what is left for non-priority unsecured debts.
FCA consumer guidance says it is important to prioritise debts because some debts are more urgent than others and missing them can have more serious consequences.
Token payments are not about paying the creditor what they ask for. They are about paying what your budget says is genuinely affordable.
The Real Debt Guy
The 8-step Token Payment Method
Before you begin
The goal is to protect your essentials first, then make a fair and affordable offer to your unsecured creditors.
You are trying to avoid three common mistakes:
- Paying unsecured debts before rent, council tax, food or utilities.
- Agreeing to a payment you cannot maintain.
- Handling everything by phone without a written record.
The steps below are designed to help you stay calm, organised and in control.
Step 1: Check where your income is paid
Before you tell creditors you are in financial difficulty, check whether your income is being paid into an account linked to one of your debts.
For example, if your wages go into a bank account where you also have an overdraft, credit card or loan with the same bank, you may want to consider using a separate basic bank account with a bank you do not owe money to.
This is not about hiding. It is about ensuring your income is available to cover essential living costs before unsecured creditors take or request payment.
If your current bank is not connected to any debts, you may not need to open a new account.
Important: Do not apply for new credit facilities as part of this process. The goal is a safe account for income and essential bills, not more borrowing.
Step 2: Move essential payments first
Once your income is going into the right place, check your regular payments.
Make sure the essentials are covered first:
- Rent or mortgage.
- Council tax.
- Gas and electricity.
- Water.
- Food.
- Travel to work or school.
- Insurance you need.
- Childcare.
- Essential phone or internet costs.
Then look at your unsecured debts.
If there is not enough money to cover the normal payments after essentials, that is the point where token payments may be needed.
Use this stage to understand your spending properly. Do not rely on rough guesses if you can avoid it.
Work out what is actually affordable
Before you contact creditors, use the TRDG Budget Planner to calculate what remains after paying priority bills and essential living costs.
Your token payment offer should come from your budget, not pressure, panic or guesswork.
Click here
Step 3: Contact your creditors in writing
When you contact creditors, keep everything in writing where possible.
Email is usually easiest because it gives you a dated record. If you write by post, keep a copy and consider proof of postage.
In your message, explain:
- You are experiencing financial difficulty.
- You are reviewing your budget.
- Your priority bills and essential living costs come first.
- You are offering a token payment based on what you can afford.
- You would like interest and charges frozen or reduced where possible.
- You want all communication in writing.
If a creditor sends a letter asking you to call, you can still respond in writing. A phone call may be fine for basic admin, but payment plans and important agreements should be confirmed in writing.
If you are unsure whether to call or write, read: Should You Call or Write to a Debt Collector in the UK?
Simple wording you can use
You could write something like:
“I am currently experiencing financial difficulty and cannot afford the normal repayment. I have reviewed my income and essential living costs, and I can afford to pay £[amount] per month at this time. Please confirm this arrangement in writing and consider freezing or reducing interest and charges while my circumstances are reviewed.”
Only include an amount you can genuinely afford.
Step 4: Calculate your token payment
This is the most important part.
Your token payment should be based on your real budget. Start with your income, subtract priority bills and essential living costs, then see what is left.
If there is money left, divide it fairly between your unsecured creditors.
Example:
Claire has a personal loan payment of £155 per month. She has just lost her job and cannot afford the normal payment anymore.
After covering rent, council tax, food, energy and travel, Claire has only £20 left for unsecured debts.
If she has four unsecured creditors, she may offer each creditor £5 per month while her situation is reviewed.
The exact amount depends on the budget. For some people it may be £1. For others it may be more. The point is that the offer must be affordable and sustainable.
FCA rules say firms must take reasonable steps to ensure repayment arrangements are sustainable. A plan is unlikely to be sustainable if it means you cannot meet priority debts and essential living expenses.
Step 5: Keep paying what you can afford
Once you have calculated your token payment, keep paying it if you can.
Do this even if the creditor has not replied yet, as long as the payment is affordable and you have the correct account details.
This shows you are not ignoring the debt. It also helps you build a clear record of trying to deal with the situation.
But do not sacrifice priority bills to make token payments. If you cannot afford anything after essentials, tell the creditor that in writing and explain that your budget currently shows no available surplus.
FCA rules include accepting no payments, reduced payments or token payments for a reasonable period as examples of forbearance where the customer cannot meet existing debts without missing priority debts or essential living costs.
Step 6: Decide whether to complete an income and expenditure form
A creditor may ask you to complete an income and expenditure form.
This is used to understand what you can afford. You can complete it if you are comfortable doing so, but make sure the figures are accurate and based on your real household costs.
You do not have to use the creditor’s form if you have already completed a clear budget. The important thing is that your offer is supported by enough information to show what is affordable.
Before sending anything, check:
- Your income is realistic.
- Priority bills are included.
- Essential spending is not understated.
- The offer is affordable beyond one month.
- You keep a copy of what you send.
Do not let a creditor talk you into a payment that looks good on paper but leaves you short for food, rent, council tax or utilities.
Step 7: Get the token payment plan confirmed
If the creditor accepts your offer, ask for confirmation in writing.
The confirmation should ideally explain:
- The amount you will pay.
- How often you will pay it.
- How long the arrangement will last before review.
- Whether interest or charges are frozen, reduced or still being added.
- How the arrangement may be reported to your credit file.
- What happens if your circumstances change.
Do not rely on a phone conversation alone. If something matters, get it confirmed.
FCA rules say firms should give customers in arrears or default clear and understandable information about their financial position, their options, and the potential impact of support on their balance and credit file.
Step 8: Review the plan when your circumstances change
Token payment plans are usually reviewed.
That review might happen after one month, three months, six months or longer. It depends on the creditor and your circumstances.
When the review arrives, do not panic and do not feel pressured to increase payments if your situation has not improved.
If nothing has changed, write back and explain that your circumstances are the same and that you want the current arrangement to continue.
If your income has improved and you can afford more, you can review your budget and increase the payment if it is genuinely sustainable.
If your situation has worsened, update the creditor and send a revised affordable offer.
The rule is simple: review the plan based on your real budget, not guilt or pressure.
Only pay what your budget says you can afford. A payment plan that breaks after one month is not a plan.
The Real Debt Guy
Will token payments affect your credit file?
Yes, token payments can affect your credit file.
If you are paying less than the contractual minimum payment, you are not keeping to the original agreement. That can lead to missed payment markers, arrears, arrangements to pay, or a default.
This does not mean token payments are wrong. It means you should understand the trade-off.
If the alternative is paying unsecured debts and then falling behind on rent, council tax, food or energy bills, that is not a sensible trade-off. Essential bills come first.
If your credit file is already being affected, the focus should be on making the situation manageable and avoiding unaffordable promises.
FCA consumer guidance explains that if you agree an arrangement with a lender, this can be reflected on your credit file, but missed payments can also affect your credit file.
Can interest and charges be frozen?
You can ask the creditor to freeze or reduce interest and charges.
They may not always agree straight away, but you should still ask, especially if the debt balance would keep rising while you are only able to make token payments.
FCA rules give suspending, reducing, waiving or cancelling further interest or charges as an example of forbearance where a customer is in financial difficulty and the debt would continue to rise if charges continued.
Put the request in writing and keep a copy.
Can a creditor refuse token payments?
A creditor might refuse your first offer, ask for more information, or push for a higher payment.
That does not mean you should agree to more than you can afford.
If your offer is based on a realistic budget, write back calmly. Explain that the offer is the amount currently available after priority bills and essential living costs.
FCA rules say firms must not pressure a customer to pay a debt in one payment, very few payments, unreasonably large amounts, or within an unreasonably short period where this would harm the customer’s financial circumstances.
If a creditor or debt collector refuses to engage properly, continues to pressure you, or ignores evidence of financial difficulty, keep records and consider making a complaint.
What to keep copies of
Keep a folder with:
- Your budget.
- Letters and emails to creditors.
- Replies from creditors.
- Proof of postage if you write by letter.
- Payment receipts or bank records.
- Any agreed payment plan.
- Any review letters.
- Any complaints.
This matters because it helps show that you engaged, explained your situation and made affordable offers.
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FAQs: UK token payments
How much should a token payment be?
A token payment should be based on what is genuinely affordable after priority bills and essential living costs. It could be £1, £5, £10 or another amount. The amount should come from your budget.
Can I make token payments to all creditors?
Token payments are normally used for unsecured non-priority debts. Priority bills such as rent, mortgage, council tax, gas, electricity and court fines should be dealt with first.
Do creditors have to accept token payments?
Creditors may ask for more information or review your offer, but FCA rules expect firms to treat customers in arrears or default with forbearance and due consideration. If your offer is realistic and based on your current financial difficulties, keep all communication in writing.
Will token payments stop a default?
Not always. If you are paying less than the contractual payment, your credit file may still be affected and a default may still be registered. Token payments are about affordability and control, not protecting your credit score at all costs.
Should I call the creditor or write to them?
Write where possible. Email or letter gives you a clear record. If you call for basic admin, ask for anything important to be confirmed in writing.
What if I cannot afford even £1?
If your budget shows no available surplus after priority bills and essential living costs, tell the creditor in writing. Explain the situation and ask them to hold action while your circumstances are reviewed or while you seek help.
How long can token payments last?
There is no single fixed time limit. The arrangement should be reviewed based on your circumstances. If your situation improves, you may be able to increase payments. If it does not, you can explain this at review.
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About The Real Debt Guy
The Real Debt Guy has completed the DipFA Level 4 qualification and shares general debt and money education for UK consumers.
This article is for general information and education only. It is not personal financial advice or regulated debt advice.
The Real Debt Guy is not FCA regulated. If you need advice about your specific circumstances, speak to a qualified debt adviser or an FCA authorised organisation.
