Whilst the clever way they’re marketed may make store cards sound appealing, most financial experts reckon that in general a lower APR credit card will offer better value.
Information from the Office of Fair Trading tells us that 42% of people taking out a store card do so on the spur of the moment, having gone to the shops with no intention making a major purchase. People are often approached in store and some of the sales people can be rather pushy to say the least. They may have their reward in mind slightly more than your best interests!
There’s usually a tempting opening offer, such as 10% off today’s purchases if you sign up for your card now. This is fine if there’s a major purchase which was under consideration anyway and you have the funds to finance it. You will have an interest free period, usually between 35 and 55 days, so why not go ahead. It makes perfect sense. Fine, but what happens if by any chance circumstances change and you’re unable to pay the full balance at the end of this time? There are many points to consider and before agreeing to filling out the application, so take some time to check out some of the facts.
There’s the Annual Percentage Rate, or APR. It can near the figure of 30% on some store cards. Comet’s Timecard charges 29.9% and Debenhams is currently 28%. Two of the store cards offering better value are the old favourite Marks & Spencer, at 18.9% and John Lewis (Waitrose) who charge 13%.
You need to ask what the interest rate is on the card you’re considering. Check exactly what interest rate you would be paying on an un-cleared balance. There may also be an interest free period. If this applies, how long does it last and you need to ask what the interest rate will be thereafter.
Payment Protection Insurance is an optional extra with most of these schemes. Cover varies and you will need to find out what benefits are on offer and to take into account what it’s going to cost you.
Ask what penalties apply for default and late payment. Check all the details of the agreement carefully. Don’t be pushed into a hasty decision. Take the agreement away, read it and then ask questions.
Always make the comparison between a store card and other forms of payment. Store cards and indeed credit cards generally can tempt you to overspend. Statements come in monthly and it can be really difficult to keep a record of spending, especially on multiple accounts. There’s no problem at all if you can be really strict about paying off the full balance within the interest free period. Many people lack that discipline.
Store cards are regulated under the Consumer Credit Card Act. Rules are in force for any loan under £25,000. There is the likelihood that a complete review of the rules is to be carried out and this is under consideration.
Credit cards have become a way of life. The market is very competitive and all are vying for your custom. Make sure you know the difference between a good deal and a bad one.
