Don’t Fall Into the Store Card Trap
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Over the past two months I have done a lot of shopping. First Christmas and then the sales have seen me being dragged through as many shops as the rest of the year combined, and in almost every shop I was offered a store card. These can be very tempting since the discounts offered can be generous and it seems to make financial sense.
The downside, however, that is never mentioned by the smiling ladies on commission is that store cards have APR’s that vary from the quite high to stratospheric. Many have reached 30%.
Store cards don’t pose a problem if you are disciplined enough to pay off the balance within the interest-free period (typically between 35 and 55 days). But, if you can’t pay the outstanding balance each month, the interest due on the unpaid debt can soon mount up.
A recent survey has also pointed the blame at store cards for another problem. Up to 20% of people who take out debt consolidation loans are failing to remove other sources of credit. Store cards are a major part of this as people mistakenly believe that if they have cut up their troublesome credit cards the store cards can remain.
The general rule with store cards is that with discipline they can be used to take advantage of the discount offers and then the balance paid off before the end of the interest free period. If you think you may not be disciplined enough to be able to do that then do not take one. As soon as the interest free period has ended then the interest payments will start to reduce the value of the discount and will soon outweigh it entirely.
With interest rates at 30% there are clearly cheaper ways than obtaining credit than store cards and they do rely entirely on the attention grabbing discount available when you sign up. A much better option is to take out a credit card, with interest rates of 14% or lower this means that although the discounts will not be available to you the interest payments will be manageable and not leave you with a large and growing debt problem.
