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On the look out...
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The Consumer Spy
Friday 14 November 2008
Becca Talbot
becca.talbot@consumerchoices.co.uk
I am the Consumer Spy, on the look out for hidden catches and dubious clauses, reading the small print so you don’t have to…....
Avoid the credit nightmare before Christmas
With Christmas drawing closer and the credit crunch in full swing, the Consumer Spy knows that people are starting to panic over how they will afford the expenses of Christmas time, mistletoe and wine...
And undoubtedly people with poor credit ratings and squeezed finances will find it particularly tough this year, meaning certain sneaky store cards will seem increasingly attractive.
This month the Consumer Spy investigates the Argos card with a sky-high APR…
As senior editor of CreditChoices.co.uk Seamour Rathore recently reported, the message financial experts are pushing this festive season is clear: “Don’t fund Christmas on credit.”
But with only four weeks until the big day, and the average family’s Christmas budget coming in at just over £600, credit cards and loans are understandably tempting.
Don’t shop for it – Definitely don’t Argos it!
The latest card to hit the market comes from high-street giant Argos. Teaming up with Provident Personal to offer the Easy Shop Card, a card, which in their words, “lets you shop at Argos, without the worry of overspending,” the Argos card has been designed to take the hassle out of Christmas for shoppers with poor credit ratings who find it hard to borrow elsewhere.
The card, branded by Liberal Democrat shadow chancellor Vince Cable as “wicked,” has seen Provident publicly criticised for promoting such high APRs (Annual Percentage Rate) on cards and loans at Christmas, a time when people are under a lot of pressure.
Though not technically a store card, and as Provident have clarified, definitely not a credit card, the card acts as a personal loan, allowing you to borrow between £100 and £500 to spend in any Argos store around the UK. With no “complicated forms” to fill in, and “affordable, fixed, regular payments,” Provident seem very proud of their new card. They’ve even gone as far to say it’s a “convenient way to spread the cost of your shopping and stay in control.” Sounds like a great deal…
Until you find out it has a colossal APR of 222.7%!
Obviously, high APRs for store cards are nothing new, and sensible shoppers have always been wary of such deals. However, as recent research has shown, the cost of borrowing money on store cards has risen by 1% over the past six months, with the average interest rate on a store card now 25% compared to a standard ‘use anywhere’ credit card, which average around 16.9%.
So, with a horrifyingly high APR of 222.7%, the Consumer Spy knows this card is just a disaster waiting to happen.
For example, buying a PlayStation 3 from Argos for £300 using your Easy Shop Card, with weekly repayments of £15 for 27 weeks (at 222.7% APR), will cost you £405 overall. That’s an extra £105, enough for two games and a spare controller!
The Argos loan calculator lets you see for yourself just how much your repayments will be with such a high APR.
Provident said its home credit is highly valued by 3 million customers in the UK, and 94% of its customers have said they are satisfied with the service.
Criticised for marketing a product that encourages those who may already be in financial difficulty to borrow even more, the Easy Shop Card allows customers to miss or delay payments if they are unable to make them.
Provident told the Consumer Spy exclusively that if a customer is having difficulty making repayments they are able to talk with their money collection agent to arrange a solution – this could entail suspending repayments for as long as is required, or negotiating a lower weekly repayment.
They said they offer this “service” at no extra charge, so the total repayment amount agreed when the loan was originally arranged remains the same throughout the course of the loan, giving the customer the security of knowing that it will never increase and that they have the flexibility to reschedule repayments should the need arise.
Provident also said the card is one of the most transparent forms of credit available. The Consumer Spy agrees; it is transparent. While it doesn’t hide the fact that it has a huge APR, it’s pretty clear that this card should carry a health warning that’s visible to anyone considering it fund their Christmas.
Provident went on to say it was unfair to compare their card with other credit cards, as the money being lent is typically a lot less and spread over a longer time frame.
With regards to their high APR, they said: “Other lenders do not include administration and penalty charges in their APRs and do not have the expense of making 80 million home visits a year, and so comparisons with other credit options are misleading.”
Health warning
The Easy Shop Card can only be redeemed at Argos, but Provident Personal Credit also sells gift vouchers for use in over a hundred major high street stores, including Woolworths, HMV, Poundstretcher, and JJB Sports.
The vouchers, which allow shoppers to borrow between £50 and £500 for “those people you never know what to get,” also have a typical APR of 222.7% spread across six months.
Both the voucher scheme and the Easy Shop Card have received criticism from politicians and consumer groups, yet neither has been pulled from the market. And they appear very attractive to many vulnerable people who are struggling to get credit elsewhere, but still want to ensure they can have a good Christmas.
To avoid the debt collectors knocking at your door during the season of “good will”, the best piece of advice the Consumer Spy can give anyone out on the high street shopping for presents is to steer clear of any suspiciously tempting store cards this Christmas.
If you have a burning issue or a dodgy clause you’d like the Consumer Spy to investigate, please email me.
As always, Consumer Spy is on the look out for hidden catches and dubious clauses, putting you in know.
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