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