Personal Finance | Interview Answers | Winning CVs | Beat the Recession

Store Cards

Beware store cards. You should take scissors to most or all of them. All too often, they are overpriced sources of credit.

If you have a store card, and apparently 19 million of us do in the UK, the chances are you should shred it. If you don't have one, you should probably keep it that way.

The trouble with store cards is that most of them have an APR (annual percentage rate) of around ten percentage points above those available with credit cards, and there are real questions whether these higher rates are moderated by competitive pressure. To put it another way, the gap between rates on store card borrowing and credit card borrowing may be more than can be explained by additional costs or the value of other benefits to store card holders. In a nutshell, it looks like they're ripping us off.

The UK 's Office of Fair Trading (OFT) conducted a study in the spring of 2004 which found that consumers don't find it easy to assess the costs and benefits of using store cards.

Of course, if you're the model of financial self-discipline and you actively manage your use of a store card, you may find it worthwhile to have one. However, for most of us, there are likely to be better, cheaper deals to be had.

Here's an Idea for you

If in a moment of weakness you find yourself contemplating signing up for a store card, just try to remember these three things:
Before signing up for a store card, consider your options - do you have alternative forms of credit available and would they better suit your needs?
Check what the APR on the store card is - especially if you don't plan to pay off your balance every month. A high APR could outweigh the benefits of an initial discount.
Don't sign anything until you've considered it carefully - take the form away with you to consider if you're uncertain.


Custom Search