Festive warning for Christmas shoppers

With Christmas fast approaching millions of people across the UK are hitting the high streets and shopping malls to buy everything from gifts and gadgets to clothes and food.

The stores are gearing themselves up for increased business, and many are hoping to persuade customers to sign up for their store cards. However, experts are urging consumers to avoid taking out a store card, otherwise they could end up paying a fortune in interest, bumping up the cost of Christmas purchases considerably.

The expense and chaos of Christmas sees many people sign up for store cards that they would otherwise not have taken out, and once they have received their card the temptation if often too much and they start spending on it. However, it is important to remember that the average interest rate on store cards is far higher than on many credit cards, coming in at around 24.4%.

Reports also indicate that a number of store cards have seen interest rates rise since last Christmas, and this includes an average 2.7% rise on cards from Burton, Dorothy Perkins, Argos and Marks & Spencer Money. The store card for Marks & Spencer has seen interest rates rocket, rising from 18.9% last year to 23.9% this year. According to officials from M&S this is to compensate for a lower level of store card customers stemming from more people moving across to the M&S credit card.

One industry professional stated: 'With storecards the advice is simple: Don't use them, avoid the gimmicks, don't be lured in. Invariably people forget about spending on their plastic, or they use credit precisely because they know they won't be able to repay the debt immediately. Under those circumstances there is no more expensive form of borrowing than a storecard. The discounts can be attractive, and some storecards offer 0% deals if you spend a lot of money in-store. So if you're adamant you need a storecard, ensure you make the most of it by keeping up to speed on all the incentives on offer.'

Tom Smith
30th November 2007