Avoiding an OutOfMemoryError

I recently made a method in Java to get the permutation of a string but it's throwing this when the string is too long: java.lang.OutOfMemoryError: Java heap space I'm sure that the method is efficient so I need advice on how to spread the calculations to avoid the error. I'm running it using the console in Eclipse.

public static ArrayList<String> permutation(String s) {
        ArrayList<String> res = new ArrayList<String>();
        if (s.length() == 1) {
            res.add(s);
        } else if (s.length() > 1) {
            int lastIndex = s.length() - 1;
            String last = s.substring(lastIndex);
            String rest = s.substring(0, lastIndex);
            res = merge(permutation(rest), last);
        }
        return res;
    }
    public static int factorial(int n) {
        int fact = 1;
        for (int i = 1; i <= n; i++) {
            fact *= i;
        }
        return fact;
    }
    public static ArrayList<String> merge(ArrayList<String> list, String c) {
        ArrayList<String> res = new ArrayList<String>();
        for (String s : list) {
            for (int i = 0; i <= s.length(); ++i) {
                String ps = new StringBuffer(s).insert(i, c).toString();
                res.add(ps);
            }
        }
        return res;
    }

Greets, Robin