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Low-income borrowers were warned yesterday against signing up for an Argos payment card which has an interest rate of up to 222.7%.
The Easy Shop card, which the retailer has launched in partnership with sub-prime lender Provident Personal Credit, is aimed at cash-strapped shoppers who want to borrow between £100 and £500 to spend in Argos stores.
The lender's website says applying for the card is "simple and straightforward" with "no complicated forms", and that borrowers can make "affordable, fixed, regular repayments - collected by a local agent".
The interest rates on offer are significantly higher than those for standard credit cards, where APRs tend to be below 30%. On a £300 loan repaid over a year, the website quotes a typical APR of 183.2%, while shorter-term borrowing attracts even higher rates.
A consumer borrowing £100 on the card would be charged £35 in interest on repayments of £5 a week over 27 weeks, giving an APR of 222.7%.
According to the price comparison website uSwitch, a shopper using the card to buy a Nintendo Wii console from Argos for £179.99 would have to repay £248.46 over six months.
Vince Cable, the Liberal Democrat Treasury spokesman, described the promotion of the card in the run-up to Christmas as "wicked".
"A lot of people are finding it increasingly difficult to borrow from the mainstream high street banks. Many may well feel they have to fall back on things like this. There is a real risk of a very large number of people being exploited as a result," he said.
Louise Bond, personal finance manager at uSwitch, said card providers seemed to be "cashing in on desperate consumers". She added: "Despite the recession, life does have to go on, but we strongly advise people not to be lured into this type of deal.
"It may seem like a quick fix but it will cost you dear in the long run."
Provident Financial said the card was no different from other home credit loans, except that people were given the money on plastic rather than in cash.
It said the £35 for borrowing £100 was a charge rather than an interest payment, adding that people would not face additional penalties or interest charges if they fell behind with repayments. It added that the APR figure was misleading due to the short time-frame of the loan.
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