Don’t Be a Victim Of Store Cards This Christmas

With Christmas placing many household budgets under strain, it’s tempting to look at other forms of credit to see you through the festive season.

Whilst some store cards can offer good value over the short term it is imperative that the folly of keeping a balance on a store card is avoided as otherwise it could turn out to be costly.

Lisa Taylor of online comparison site Moneyfacts, has warned that while initially the introductory offers from store cards are appealing they may lead to financial misery due to high rates of interest. She also voiced her disappointment at recent recommendations made by the Competition Commission regarding store cards.

She said; “ It is disappointing to see that the Competition Commission’s recommendations only scratch the surface of the issue with store cards, failing to take any action on the underlying problems, of the exorbitantly high rates, potentially mis-sold PPI and the lack of upfront information available to the consumer.

“ It is even more worrying that the Competition Commission has set 25% as its measure of what is considered a high rate of interest in the current market. Does that mean that if all store card providers reduce their rates to 24.9%, it will be considered acceptable, even though that is over five times the current base rate and double the cost of most credit cards?

“ Putting warning notices on statements isn’t going to solve the problem. By the time you receive your statement the damage is done. You’ve already been on your spending spree and probably been persuaded to take the associated PPI cover by the shop assistant.

“ But would consumers still purchase their goods using these cards if they actually realised the true costs?

“ Many store cards providers entice consumers into accepting the card by offering an introductory discount on the goods purchased, normally around 10%.  This may be a substantial saving worth taking when making larger purchases. However this initial saving is soon eroded by the large interest charges if the consumer fails to pay off this balance in full.”

Sticking to debit cards rather than relying on credit cards or store cards will help minimise the risk of running up huge debts this festive season. Ensuring you clear the balance of any store card or credit card will prevent any unnecessary interest building up.

Also it is prudent to pay back more than the minimum payment to any card each month as paying just the minimum each month will result in the card debt accruing more interest over a longer period resulting in spiralling debt.

Alisdair Milton
4th December 2006

More Information:

• Cash Back or Rewards
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• The Value Of Having Branded UK Credit Card Loyalty Programs
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• How To Earn Nectar Points With Reward Credit Cards
  The Nectar point scheme is a scheme that allows credit card users and other shoppers to earn points through purchases. The Nectar scheme has been running since September 2002. As with other reward points schemes, the Nectar points scheme allows shoppers to earn at the rate of 2 points for every pound spent.
  

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