Store cards – good credit? «

Store cards – good credit?

When the sales assistant asks you at the counter if you’d like to receive a discount on your purchase by taking out a store card, it’s very tempting. Store cards are essentially a store’s own form of credit card, offering additional attractive benefits such as reductions on your shopping, sneak previews of sales and exclusive store card customer discount events. If you can afford it, a store card can be a great bonus, but beware – below the surface of attractive benefits and offers they are no more than expensive credit card accounts. As a result, many people find themselves caught in a serious debt trap if they can’t repay the balance every month and the interest on the balance soars. Think through all the advantages and disadvantages of store cards in detail, as well as your personal finances, before deciding whether to take one out. Don’t allow yourself to be sucked into the spur-of-the-moment temptation of the large discount at the till on your initial purchase.

What is the APR?
Stores will go out of their way to sell the great benefits of their store card to you, but most will keep quiet about the interest rate, which is often twice that of most conventional credit cards. The Annual Percentage Rate (APR) could be anything up to 35%.

Are there any hidden charges?
Store cards can really hit you where it hurts with charges and fees lurking in the small print, particularly for overdue payments. And the biggest sting in the tail is that many store cards back-date the interest calculations from the date the items were bought if the balance is not paid in full.

What is the bill period?
If you know that you can afford to clear the balance every time so that you don’t incur interest charges, then a store card can be a good deal. However, always check the bill accounting period ensure that you will be able to pay in time. Monthly bills are the norm, although they can sometimes be up to 50 days. Some store cards offer an interest-free period as an introduction. If so, you may want to take advantage of this while it lasts, but make sure you remember when it ends.

Budget for your store card bill
If you think you’ll be using the store card frequently, don’t allow yourself to get carried away with purchases without keeping track. Give yourself a monthly store card spending allowance based on your household income and outgoings and how much you can afford to spare, and make sure you hold back this amount to repay the store card bill at the end of each month.

Shop around
Why settle for a store card when there are so many great credit card offers out there? Are you really getting any benefits from discounts on purchases when the interest rates and charges are so expensive? Store cards certainly make back their money – otherwise they wouldn’t exist. Fair enough, it can seem temptingly convenient when the sales person says they’ll set it up for you there and then – but remember that it’s very easy to obtain a credit card from a bank nowadays, and they will undoubtedly have far better terms and conditions than store cards.

Just say no – you’re in control
Don’t allow yourself to fall for the hard sell if the sales person is really trying to push you to take out a store card. They probably get commission for every store card account they open. Take it at your own pace – ask questions, read the small print, seek clarification if necessary, take your time to think it through. If the sales person really wants the commission, they’ll manage to be patient. Don’t even sign up there and then if you don’t want to make a decision there and then. Simply take away the information to read at home.

Limit yourself
Just about every big retail chain offers store cards. You could be confronted with offers for dozens of them in just one day’s shopping. Don’t be tempted to sign up to all of them – this will make your finances far too complicated and you’ll soon forget where you are with each of them, which is how bills can end up unpaid. If you really want some store cards, pick out the best one or two deals and limit yourself at that.


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