Take out a store card and pay double for your gifts : Credit Card Guide

Take out a store card and pay double for your gifts

In a stark warning to consumers industry experts have stated that many people that take out store cards this Christmas and then purchase their Christmas gifts on them could end up paying double for each item.

The interest rates on store cards is extremely high, and although discounts and special offers are available to cardholders these do not come anywhere near making up for the amount paid in interest for those that make small repayments each month rather than paying off the whole balance.

This is the time of year when retail staff really push customers to take out store cards, earning themselves in commission in many cases, earning the store additional revenue, and potentially setting the customer up for a long period of spiralling debt.

With interest rates coming close to 30% APR on some store cards, customer that make only the minimum payment on the card each month could find that they are in debt for years to come as they try and clear the balance, and during this time will pay a fortune in interest, doubling the cost of the items that they purchased on the card.

One industry professional stated: 'People are typically lured into store card 'deals' at the checkout because they will get a small discount on the purchase being made. In most cases this discount will be completely negated by the high levels of interest incurred by those who do not pay the balance off in full every month. More importantly, a busy checkout in a department store is not the best location to allow people to make an informed decision.'

Many major stores have come under fire and investigation because of the techniques used to push customers into taking out these costly store cards. The Competition Commission has also investigated store cards because of the high interest rates charges, although the interest rates still remain extortionate.

Tom Smith
15th December 2007

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