High Interest Department Store Cards

Are There Any Advantages in Applying For a Store Card?

Jul 24, 2009

Store cards generally get a bad press because of the high interest rates charged but if people are careful there are some advantages that come with a store card.

A store card is simply a credit card that can only be used in one store or group of department stores. In some instances the card can also be used to make on-line purchases from the company.

Department Store Cards Have High Interest Rates

Research carried out by well-known UK financial journalist Martin Lewis shows that around two thirds of the major store cards available charge over 25% APR and many nearer the 30% APR mark.

Customers approaching the checkout or pay point in a store may well be regarded as easy prey for sales staff who are often offered financial incentives to ‘sell’ the concept of a store card to someone that’s already decided to make a purchase.

Applying for a Store Card

The form filling is relatively painless and is not time consuming although a cheque guarantee or credit card is usually required as part of the procedure. It means therefore that many consumers who walk in simply to make a purchase, walk out with a store card without realising exactly what they have signed up to.

Martin Lewis makes the point that store cards are targeted at the young and that: “Store card providers must love debt illiterate youngsters; they’re an easy target and often spend on these cards without understanding how to manage them, racking up expensive, ill afforded debts.”

Directgov Advice on Store Cards

Directgov, the UK government consumer website has a section on store cards which advises that, yes there is usually a discount or a free gift offered with the first purchase but warns the interest rates charged can be double that of a more traditional credit card.

Store Card Payment Protection Insurance (PPI)

Payment Protection Insurance can often be included with a store card but before agreeing to PPI there are a number of points to be considered.

Over the last ten years or so the Financial Services Authority (FSA) has heavily fined a number of financial organisations, which underwrite the store cards, for the miss-selling of PPI on a range of financial products including store cards.

Advantages of a Store Card

There are obvious disadvantages with store card but if people are very careful there can also be some advantages. These advantages are only possible if the monthly bill is paid in full and on time.

As well as the opening incentive of extra discount or a free gift, many stores also offer on-going and additional benefits to customers with a card. So if these benefits are not available to customers paying by the traditional credit card or by cash or cheque perhaps a store card is worth considering.

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The copyright of the article High Interest Department Store Cards in Personal Budgeting/Finance is owned by Neil Gunn. Permission to republish High Interest Department Store Cards in print or online must be granted by the author in writing.