Visa card issued with an interest rate of 365%
Website design By BotEap.comNews broke yesterday that a leading financial company has made a Visa credit card available to customers with an exceptionally high interest rate. The credit card is offered to customers who have a bad credit rating and has an interest rate of 365%.
Website design By BotEap.comThis is 10 times the highest interest rate for a credit card available at a commercial bank. The company offering the deal is Provident Financial, a company based in Bradford. Consumers are told to pay their bill in weekly installments that are collected at their doorstep by company agents.
Website design By BotEap.comThe card is preloaded with a loan amount and then the financial company charges its clients an APR of 183% if they use the card, during a period of 56 weeks. An article in Times Online revealed that “If the loan [on the card] it’s £300 more [the] period, the customer is expected to pay £504. However, if he or she borrows the same amount over 31 weeks, the APR can be as high as 365% and a customer can expect to pay £465”. The highest APR for a credit card available on the high street main is only 35.9%.
Website design By BotEap.comConsumer experts have said the reason some people might choose the card is because they wouldn’t be eligible for credit from other loan providers because they have low credit scores or no taxable income. The Times article also said that “home loan companies only require that their customers have an address that agents can go to and collect payments and also have some sort of disposable income, even if it’s profits.”
Website design By BotEap.comCompanies like Provident Financial could be seen as taking advantage of those who are most likely to be unable to make payments and the firm has been criticized for “charging such high APRs to customers who are least likely to be able to afford them.”
Website design By BotEap.comIn the recently published article in Times Online, the National Consumer Council (NCC) said: “These interest rates are staggeringly high. It is unfair that poor people have to pay more to borrow. This will be even more difficult with the credit crunch. .”
Website design By BotEap.comAt the other end of the spectrum, a special low-rate Barclaycard is available with an APR of 6.8% that includes benefits and a 24-hour helpline. It seems ironic that those who can easily afford repayments are charged much less interest. Loans like Provident Financial credit cards are responsible for the current credit crisis that began due to the unreliable nature of the US subprime loan market. Consumers who could not afford to keep up payments were given loans of high interest by irresponsible financial companies. In the US, it was recently reported that the number of people falling behind on their credit and loan payments is higher now than it has been since 1992.
Website design By BotEap.comThe exorbitant interest rates on the Provident Financial credit card come to light at a time when the Bank of England is lowering interest rates for the third time since December. The Bank of England hopes to ease the pressure currently on cash-strapped homeowners by cutting interest rates to just 5%. Last year, the Office of Fair Trading told UK banks to stop irresponsible lending and hidden charges with an emphasis on being fair to those on low incomes.