Vanquis' sub-prime credit card is aimed at consumers who would be rejected by most mainstream card issuers. Consumers on a low income or who have had a checkered credit history, such as a record of credit arrears or CCJs, can apply for the Visa card, which charges interest rates up to 69.5% APR.
The card has a typical APR of 49.9% but the actual APR varies according to a risk assessment of each applicant, with rates as low as 17.3% on its gold card. Unsurprisingly, with a typical rate ten times above the base rate, its launch has attracted condemnation from consumer groups.
Vanquis, however, is marketing the product as offering a second chance for people with checkered credit histories. A range of credit limits are offered, starting from as little as GBP150, the lowest limit available in the UK, allowing a customer with a very poor credit history to apply for a 'starter account', receiving a low credit limit and high APR. A review is automatically conducted every 12 months. If a card holder makes all their repayments on time they are offered a lower APR and higher limit. In this way Vanquis hopes to help customers rebuild their credit ratings.
Vanquis - a subsidiary of Provident Financial - is not the first issuer to enter the sub-prime credit card market, which is now attracting more interest as it is seen by the lending industry as one of the few remaining undeveloped markets in the UK and offers respite from the highly price-competitive mainstream card market. Indeed, most of the UK's largest credit card issuers have taken tentative steps to enter the market, including Barclaycard, HBOS and RBS.
Considering the potential public relations fallout of such products, it is unsurprising that none of these cards have been heavily advertised. While issuers will have to walk a marketing tightrope to avoid tarnishing their brand, ultimately the allure of this undeveloped market is simply too large for issuers such as Vanquis to pass up.