70% Interest Rate Charged By UK Credit Card Companies

While surfing the net for all things credit card related I came across a story in the UK Guardian about how a company is targetting low income families with a credit card offer that charges up to 70% interest.

At first I couldn’t believe that such an exhorbinant rate could be charged, but it seems Vanquis are offering a standard rate of 49.9% and may offer a rate as high as 69.5% to clients they deem to be high risk.

Now looking at my current financial situation it’s obvious I’m no financial genius, but why would anyone take on debt at such a high rate of interest.

Vanquis defends the offering saying that consumers don’t get into trouble with high interest rates, it’s high credit limits that cause the problems. They intend to find the clients by trawling through credit databases and seeking out people who are earning less than 5,000 pounds and offering a credit limit of only 150 pounds.

Managing Director Les Stillwell says that the interest rate will be reviewed each year and will drop 3-4% based on their payment history. I don’t doubt the client review will also include a suitable limit increase in order to keep the clients a massive ocean of revolving debt that they can never pay off.

Imagine starting off at 69% interest and 10 years later your still paying off your debts at a bargain rate of 30%.

On the bright side politicians are looking at legislating a maximum rate of interest that can be charged.

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