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Indebted and desperate turning to high interest credit cards
Monday 8th March 2010Families are reportedly struggling to cope with the aftermath of the credit crunch with the deceptive lending of a helping hand from sub-prime credit cards, which can carry interest rates of up to 60%.
Statistics show that one million consumers have been rejected from high street banks, and have been forced to seek high interest alternatives.
With credit card debt write offs spiralling, high street banks’ fear of customers missing repayments has led them to take the safe option of turning away credit seekers that could be considered a risk.
Provident Financial - a credit firm that specialises in lending to borrowers with poor credit histories - has admitted to declining over 830,000 applications, though still maintains 426,000 customers.
Chris Tapp, director of debt charity Credit Action, told newspaper the Daily Mail: “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.”
Popular Provident’s credit card Vanquis can rack up an interest of £1,108 over an 11 year period for a £500 credit, according to financial data experts, Defaqto.
Mr Tapp continued: “The rates on these cards are very high if you can not 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.”
Conservative Lord Marlesford has warned that the credit card debts of some people “would never be paid off”, leaving them facing “a very large reservoir of very toxic debt”.
Former treasury minister Lord Higgins added: “The recent increase in the interest charges on credit cards, when the cost of capital for these credit card companies is probably at the lowest level ever, is unjustified.”
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