Trying to get credit when you’re in debt, or have a poor credit score, can be incredibly frustrating.  It might be the case that you’ve got a less-than-ideal credit score due to a County Court Judgment a few years ago, or had a few missed payments on a mobile phone bill. You might have even had a financial emergency like a car repair or healthcare bill, and as a result missed your rent payments and damaged your credit score even further. When things like this happen, it can be all-too-tempting to turn to a sub-prime credit card as a way to get the credit you need – but is this a wise choice?

What is a sub-prime credit card?

A sub-prime credit card is a card designed to be obtainable for people with substandard credit scores, bad credit histories or debts in their name. ClearScore defines anything below 380 as a poor credit score, and the idea of these cards is to make getting credit possible for people who can’t qualify for normal credit cards. As you can imagine, however, there’s a catch.

Most of these sub-prime cards have high interest rates, meaning that they can acquire a high amount of interest very quickly if you’re not careful. What’s more, they’ve also got quite low credit limits, meaning that you can’t borrow a huge amount of money on them anyway – and what you do borrow you pay a lot for. 

Making an already bad situation worse?

For some people, it would appear so.

It’s estimated that around 4 million people in the UK own a sub-prime credit card, and while they might at first seem like an attractive proposition (or even the only possible choice) for people with poor credit scores in need of money, they often leave their owners worse off.

There are multiple reasons for this. Firstly, sub-prime credit cards have very high interest rates, with some as high as 70% APR. Whilst less than the APRs of payday loans (some of these have interest rates as high as 1421%) they’re still very expensive, but it’s thought that the lower interest rates compared to alternatives like payday loans is making more people turn to them as an option.

Recent findings found that instead of using them as a quick fix to address a short-term financial issue, like paying for a car repair or covering for wages for a few days until payday, people are instead racking up large amounts of debts by not paying them back quickly enough.

Debt charity StepChange found that almost four in five of its clients (79%) said having a sub-prime credit card had made their situation worse. What’s more, 68% of users said that they’d borrowed more than they initially expected do, plunging them even further into debt than they had been before they got the card.

A lifetime of debt

Another problem that’s plaguing owners of sub-prime credit cards is the persistent debt that comes with them. Because sub-prime cards can have such low minimum repayments, paying off the minimum amount required on them can result in the debt taking upwards of 25 years to pay off, with long repayment periods such as this causing card owners to pay huge amounts of money in interest and charges along the way.

Alastair Douglas, Chief Executive of credit comparison site Totally Money, said, “It’s really important people try to avoid slipping into the ‘minimum repayments trap.’ A recent Totally Money survey found more than six in 10 people expect to clear their debt in half the time it takes by making minimum repayments.”

“But, by only making the minimum repayment, people could be signing up to a 30-year repayment plan. Many are dangerously unaware how long it takes to clear debt by only repaying the minimum.’

If you’re considering getting a sub-prime credit card, or already own one, we’d urge you to be extremely careful. Whilst they’re fairly harmless if they’re paid back fully and within a few days so little interest racks up, they can be very dangerous if you take a long time to pay them back.

Our helpline team are always available to talk if you’re worried about debt from sub-prime credit cards, or any type of debt for that matter. You can speak to one of our advisers between the hours of 8am to 8pm, Monday to Friday, and 9am to 3pm on Saturdays by calling 0800 316 1833 .