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Credit Cards & Loans

Zopa launches credit card with sub-prime interest rate

Emma Lunn
Written By:
Emma Lunn

The digital bank claims the credit card is ’revolutionary’ – but with a typical APR of 34.9%, it’s an expensive way to borrow.

Zopa says the card is designed to help customers stay in control of their money and their debt, and it comes with a smartphone app and a range of budgeting features.

Interest rates on the card start at 9.9% APR but the typical rate is 34.9% APR.

This interest rate is considerably above the average credit card purchase rate of 18% to 20% APR, and a far cry from the raft of credit cards which offer 0% interest on purchases from three to 26 months.

Zopa’s credit card comes with a ‘Safety Net’ feature which enables customers to set aside part of their credit limit for unexpected expenses.

Customers set their own personal financial buffer when they initially set up their card, and receive an instant notification to let them know they’re getting close to their Safety Net limit.  Should they want to access the money in the Safety Net, they can do so by unlocking it in the app.

Other features include real time balances and instant notifications. The app also shows the key categories where money is being spent. The card can be frozen and unfrozen and certain spending, such as gambling and cash withdrawals, can be turned off.

The app shows real time balance updates after purchases showing borrowers exactly how much credit they have remaining. Zopa says that with other credit cards customers often have to wait hours or even days for their transactions to show up in their balance.

Recent research by Zopa found that 17% of Brits surveyed don’t believe they have tools to manage their credit cards efficiently.

One in five people are unaware of their limit on their credit card and a quarter (25%) admit to going over their limit an average of three times a year.

Jaidev Janardana, CEO of Zopa, said: “The credit card market hasn’t caught up with the standard of other digital products and customers have been waiting too long for a better experience.

“At Zopa, we believe that credit cards need to be revolutionised so we have built a card designed around putting the customer in control. Industry firsts such as our Safety Net feature and handy tools like real time credit balance updates help customers manage their money effectively, enabling them to build a good credit profile.

“As an agile tech-first company, we’ll continue to develop our Zopa credit card in line with customer feedback and offer even more innovative, beneficial features in the future.”

Zopa started life as a peer-to-peer lender. It was granted a banking licence with restrictions in December 2018 but faced losing it a year later unless sufficient capital was raised to meet its regulatory requirements.

Zopa secured a last minute cash injection of £140m from IAG Silverstripe Partners, an investment arm of US-based IAG Capital.

It launched a digital bank and started offering savings accounts in June 2020.