Store cards
Here's what to look out for and what to avoid in the world of (not-so-fantastic) plastic:
Imagine the scene: you're browsing through the clothes rails of your favourite store, or standing at the till waiting to pay for a new stereo when, before you know it, a friendly face offers you an apparently amazing deal. "If you open a store account today, you could save ten percent on your purchase..." says a smiley shop assistant. It seems like a great bargain, especially if you're buying an expensive item. And who ever reads the small print anyway?
But what are you really getting into?The pros
With store cards you usually you get offered a tempting introductory offer, such as a first purchase discount or a free gift. After that the shop may give you a free quarterly magazine telling you about their new products, or invite you to preview evenings, where you have the chance to look at new fashion before it goes on sale to the general public. If you are very lucky, you may be given discount vouchers.
The cons
After your first purchase, you don't normally get further discounts. The interest on most store cards is a whopping 25-30% APR (annual percentage rate), compared to ordinary credit cards which only rack up 15-20% interest APR and can be used in other shops as well. Some shops are very keen to offer you store credit, even if you are the sort to struggle badly with the repayments.Who should use them?
To get the best value for money, only think about getting store credit if you have a favourite shop, and can pay all your balance off in one go when the statement arrives. That way you get all of the perks and don't have to pay any interest. The few high street shops that don't take ordinary credit cards sometimes offer fairly good credit deals, but you still might be better off paying by cheque or using cash.
If you're already in trouble:
Take some advice from Laura, aged 23, who ran up such enormous debts on several store cards that the interest payments alone took up most of her monthly wages. "I took all my debts and put them onto one low interest credit card. The first six months were charged at a rate of 2.5% APR and gave me a chance to pay off most of the money, and the ordinary credit card rate was so much cheaper anyway. Don't get sucked in by the introductory offers on store cards, the rest of it is a con as far as I'm concerned."
Another solution
If it's going to take longer than a few months to pay off those debts, shop around for a low-interest loan and make regular monthly payments to get yourself back into the clear. If necessary, cut up your store card to avoid further temptation.
Print this page Email this page to a friend Add to favourites
