1m consumers rejected by high street banks turn to credit cards with 60% interest rates

5th March 2010

One million borrowers turned away by High Street banks have applied for a 'sub-prime' credit card that charges interest rates as high as 60%.

The Vanquis credit card, which is provided by credit firm Provident Financial, sees 2,700 applications a day from consumers desperate for credit.

The card, which charges its poorest customers 59.9%, targets at borrowers who have a poor credit history and whose applications have been rejected by more mainstream institutions.

According to financial data experts Defaqto, a borrower with a balance of £500 on a typical Vanquis card would take 11 years to clear their balance, with £1,108 of interest accruing in that time.

Figures released by the Bank of England revealed UK consumers were a colossal £61.5bn in debt to credit card companies in January - a rise of 15% on the previous year.

With high street banks cutting their "toxic" debts, families who rely on credit to fund day-to-day living are finding it increasingly difficult to make ends meet.

Even Provident admitted that some prospective borrowers are too risky and has rejected around 830,000 applications - though it still has 436,000 customers.

There are fears that those turned down by sub-prime firm may turn to doorstep lenders and payday loans companies which charge crippling rates of up to 3,000%.

Chris Tapp, director of debt charity Credit Action, said: "These people are not being served by the high street banks and it just goes to show the appetite that there still is out there for credit.

"The rates on these cards are very high if you cannot manage your debts. The fear is that while some of these people will hopefully have been put off, many will have to turn to doorstep lenders or pay day loans companies which can charge exceptionally high amounts."

Claims Financial