Is it Really Worth Getting a Store Card?
Are Store Discounts Causing Personal Debt Problems?
Apr 10, 2009
A store card is a convenient way of paying for goods and services offered by leading department stores. In order to entice people, they offer exclusive store discounts and loyalty points to card holders that aren't available to the public. Those who settle their balance in-full each month don't incur interest charges or struggle with personal debt problems.
Get Store Discounts and Loyalty Points with a Store Card
Retailers want to encourage customers to use their store cards as this helps to boost business levels. They achieve this by offering store discounts and loyalty points that aren't available to non-holders. For example, the House of Fraser offers it's customers a £15 voucher for every £500 spent. Whilst this is an attractive offer, it can cause impulse buying and personal debt problems. It is important to only use store cards when an item is genuinely needed and not just wanted.
Minimum Monthly Repayments on Store Cards
As is the case with credit card debt, many consumers either choose or have no alternative but to make the minimum monthly repayment on their store card. In fact, a review of store cards by the Competition Commission found that only 43 per cent of consumers settled their balance in-full each month. The high interest rate charged on card debt means that making the minimum monthly repayment only clears interest which can lead to personal debt problems.
Impulse Buying and Personal Debt Problems
As already alluded to, making the minimum monthly repayment on a store card can cause long term personal debt problems. According to research by uSwitch.com, the average interest rate is 24.3 per cent. The study also found that 19 card providers charged customers in excess of 25 per cent on outstanding balances. It is important to settle balances in-full each month and avoid taking out multiple cards.
Taking out a store card to benefit from loyalty points and store discounts can help consumers to save money. However, making the minimum monthly repayment only serves to create personal debt problems. Try to avoid using a card for impulse buying and always pay-off the balance in full at the end of the month.
Individuals that have signed-up to credit agreements prior to April 2007 should check to see whether an illegal credit card or unenforceable loan agreement is in place. This could lead to the debt being written-off, adverse credit entries being removed and an improved credit rating.
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