Don’t succumb to the temptation of store cards

The credit crunch that has swept across the UK over recent months has causes chaos and turmoil in most areas of the financial markets, and amongst the victims of the credit crunch are the credit card companies. With the effects of the credit crunch to consider, coupled with already sky high bad debt levels, credit card companies have really had to toughen up in order to safeguard themselves.

As a result of this credit card companies have been forced to tighten up on their lending criteria, which means that fewer applicants will be successful in getting a credit card. Over recent weeks figures have confirmed that the level of application acceptances from credit card companies has fallen quite significantly. In addition to this credit card companies have hiked up a variety of fees and charges on their cards, and have slashed credit limits for many lenders.

These changes, and the lack of availability when it comes to new applicants, has forced many consumers to look at alternative funding options for the festive season. Every year many shoppers rely on credit cards to fund their Christmas shopping at one of the most expensive times of the year, but this year many may have found that successfully getting a credit card has become far more difficult.

This is why retailers may be rubbing their hands in glee this year. The many consumers that have been turned down for credit cards as the festive season approaches will now be scrabbling around for other ideas to fund Christmas, and no doubt many will turn to the extortionate piece of plastic known as the store card. Although most people are well aware that store cards are linked to over the top interest rate charges many may sign up to various store cards out of sheer desperation, and as a result of this could end up paying double the value for many of the items purchased.

Despite an investigation by the Competition Commission store charge cards continue to charge extortionate rates on interest on any outstanding balance, and no matter what sort of benefits or discounts the card offers this will come nowhere near the amount that you will be charged in interest on any outstanding balance. With the APR on some store cards edging towards the 30% mark consumers that only make minimum repayments could face real difficulties when it comes to paying off their debts.

Experts are urging consumers that are considering taking out a store charge card to think twice, as unless you plan to repay the balance in full within the month you will face costly charges. This is why it is important for many consumers – even if it is through sheer desperation – to avoid taking out a store card if they do not feel that they will repay the balance in full within the interest free period. For those that plan to make small repayments on their store card balance the cost of Christmas could literally be doubled. 

Tom Smith
12th December 2007