Using store cards could mean less debt : Credit Card Guide

Using store cards could mean less debt

According to a recent report taking out a store card could mean getting into far less debt than a credit card, despite the high rates of interest that are charged on store cards where the balance is not repaid in full at the end of each month.

Experts state that the reduced credit limit on store cards means that consumers are not able to get into the same level of debt as they may be able to with a credit card. The limited number of places where these store cards can be used also helps consumers to steer clear of getting into unmanageable debt levels.

Officials from the Competition Commission have stated that consumers are far less likely to get into huge levels of debt through spending on store cards compared to the debt that many will get themselves into when using credit cards. Discounts that are often applied by retailers on store cards could also help to keep costs down, state officials, and many feel that despite high levels of interest on balances that are spread over longer periods many consumers may still be better off with store cards rather than credit cards.

One official from the Competition Commission stated: "The balances tend to be much lower because the limits are much lower so I'm not sure to what extent it encourages people to get into debt."

However, other experts state that using store cards can prove very expensive in cases where the consumer has a number of store cards and does not repay the balance in full within the interest free period. In situations such as this the consumer may be better off using a low interest credit card or even a 0% purchase credit card in order to reduce the interest that has to be paid on the debt.

Tom Smith
28th August 2007

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