A credit card with APR of 70 per cent. Is this exploitation or the help some people need?

A new credit card aimed at the poor, which has a top interest rate of nearly 70 per cent - the highest ever - has been cautiously welcomed by Consumer Credit Counselling Service (CCCS).

The Vanquis Visa card attracted criticism when it was launched nationwide this month, following a trial in Scotland. It has a typical APR of 49.9 per cent but a top rate of 69.5 for borrowers it deems the highest risk.

But despite an APR of up to 15 times the Bank of England base rate, debt adviser CCCS says the card is the lesser of two evils for those who have trouble obtaining credit elsewhere.

'People should approach this with extreme caution and realise that the interest rates are very high,' says spokesman Frances Walker. 'But I can't see why you shouldn't get a credit card with a very low credit limit. We've always been concerned about the danger of driving people into the hands of loan sharks [if denied credit elsewhere].'

Vanquis targets people with limited or impaired credit ratings earning a minimum of £5,000 a year. Credit limits start at £150 and rise to £3,000. On some accounts Vanquis will levy a £20 charge for late payments and a £19 annual fee.

Walker argues that Vanquis could give 'sub-prime' consumers the opportunity to demonstrate creditworthiness by servicing such an accounts responsibly. The cards could also be a tool against financial exclusion: 'There are quite a few things that you can't do without a credit card - using the internet for instance,' she says.

But Vince Cable MP, the Liberal Democrat Shadow Chancellor who launched the party's 'Debt Action Plan' this month, does not agree with this argument.

'What getting away from financial exclusion should mean is getting access to basic banking services,' he says. 'The APRs introduced by this company sound exorbitant. It is essential that this credit card, as with all cards, makes all charges absolutely transparent so that borrowers are completely aware of how much they are paying.'

Vanquis is part of Provident Financial, the biggest doorstep lender in Britain. Walker praises the company as being co-operative when borrowers default on loans, and in its close relationships with its customer base.

But Peter Tutton, debt policy officer at the Citizens' Advice Bureau, says that the justifications for the high interest rates charged by Provident Financial on doorstep loans - which have APRs running into hundreds of per cent - do not apply to the Vanquis credit card.

'The arguments they use for higher interest rates on home credit - the cost of home collection, lack of default charges and the short-term nature of these loans - do not apply to this card,' he says. 'It is very hard to justify why this card is more expensive than any others on the market.'

Les Stillwell, chief executive of Vanquis Bank, claims there are additional services that justify the high interest charges. Cardholders will have a choice of payment frequencies, to have every transaction fully authorised so they cannot overspend, and the ability to withdraw cash from an ATM without a fee. Some accounts - which will attract higher interest rates - will have no default charges.

'We telephone every single customer when we get an application. We then provide an appropriate credit line based on that conversation,' he says. 'We back that up with additional educational material. We have to be very sensible about who we make an offer to. If we give a card to someone who can't repay us, we're in trouble from the start.'

'I'd only need it for the beer

James (not his real name) received a credit card offer from Vanquis. He comments:

'It has been one of the less appealing aspects of my rediscovered financial solvency: credit card offers once again gracing my doormat. Three years after defaulting on a card and being blacklisted, I again have the pleasure of being offered cards galore, along with the bank statements I can now just about bear to open.

Last week one caught my eye: it was from Vanquis Card, offering a 'typical variable APR' of a staggering 49.9 per cent.

The leaflet seemed geared towards me: offering options to 'build your credit rating _ even if you've been turned down elsewhere.

Will I be taking them up on the offer? I don't think so. But I am one of the lucky ones: I have a good salary - above the national average - and it is only beer that I have to do without just prior to payday. If I was unable to buy food or pay the bills, it might be an attractive - and the only - option.'