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Capital One’s sub-prime credit card

In the run up to the festive season the UK arm of Capital One is offering customers a card to help them with their Christmas shopping.

More from Capital One Bank
12 November 2008

Capital One’s sub-prime credit card

Capital One’s sub-prime credit card

The card is marketed all year round as the way to ‘rebuild your credit rating’ and it intended for customers with poor credit reports.

Cash for Christmas

Many families are anticipating a cheaper or ‘leaner’ Christmas this year and Capital One is offering it’s ‘Classic Visa Card’ as the way to a brighter Christmas.

The card is marketed all year round as the way to ‘rebuild your credit rating’ and it intended for customers with poor credit reports.

The card provides a quick response to those who apply and has a high APR of 34.9%. The credit limit can rise from £200 to £500 for those who make repayments on time for four months in a row and the product has faced staunch criticism.

Frances Walker of the Consumer Credit Counselling Service said: "I am loath to say that people should not have access to credit cards, but I do not see why people should have their credit limits raised so easily and I would urge card providers to encourage people to pay off more than their minimum payments."

Negative views

Financial expert Sean Gardener said it was depressing “when a major credit card provider is offering plastic at 34.9% in the run-up to Christmas.

“The mainstream credit card providers are clamping down on lending and that will inevitably drive more people to take up these kinds of offers. Desperate times call for desperate measures and this really does look desperate. The sub-prime credit card has arrived."

In the UK most standard credit card APRs are in the region of 17.5% and there are over 180 different cards on the market all charging less than half of the interest which the Capital One Classic card charges.

Positive views

However, it’s important to bear in mind that the real purpose of the card is to help those who have poor credit ratings to build better ones, so it simply could not be aimed at a different demographic.

It’s also well-known that those with poorer credit reports typically pay more for their credit and if someone can rebuild their credit rating while also having a slightly more Merry Christmas, is that such a bad thing?

A spokesperson for Capital One said: "Capital One's lending policies are commercially sensitive so I am unable to provide exact details about the lending criteria for our Classic Visa card.

"However, the card is aimed at consumers who may have had credit problems in the past - for example, previously defaulted on a credit agreement or missed payments within the past year - or those who have a less robust or limited credit history or no credit history at all."

These kind of cards are a good way to build a positive credit history for those with poor credit profiles and most people would switch after the card had done the trick to take advantage of a better APR.

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