Store Cards Encourage Debt
Summary
An enormous amount of people use store cards but are these people aware of the horrificly high levels of interest fees? Read this article to find out how store cards work and to get some good advice.
We must be honest, we’re not tremdous supporters of shop credit cards. However, there are more than 11 million shop card holders with outstanding balances of round about 2.5 billion pounds. And approximately seventy five high street retailers run store cards, mostly clothing retailers, department stores and large DIY retailers.
Shop cards, are a branded credit card which can only be used in the right shop or chain. Traditionally they are the most pricey way to obtain credit, charging up to and over thirty five per cent interest per year. That is far higher than the conventional high street bank credit card. Since the average shop card balance is about nine hundred pounds, that would see card holders paying 255 pounds a per annum just in interest. This can easily mount up and soon become an unmanageable debt .
Taking into account the plus side of store cards, they they can be handy as the shops usually promote them with discounts off the goods purchased on the card and they may also offer an extended interest free period. Customers can also get special discount offers sent to them in the post or be informed of new merchandise before other customers.
On the negative side, peril awaits those who are easily tempted by ”nothing to pay for 6 months”, “interest-free” or discounts offers mainly those who may already be juggling debt . These credit card holders may be using the cards for the reason that they haven’t got the cash to pay the whole amount now and they are living in hope that they will be able to pay next month. Not a good policy!
Shops should be concerned about overly pushy sales assistants promoting store cards to customers who have hardly any understanding about how to control their use of the store card. In our view, it’s very easy to cajole people into having a credit card, however if you fail to pay off the total amount within the interest-free period this kind of card is an extremely costly way of obtaining credit .
We do admit that the credit cards can be very attractive in order to get a discount on your shopping bill.
Nevertheless, it is ever so easy for debts on your shop card to escalate out of control.
Consequently, as a general rule we recommend avoid shop cards unless you are totally confident} that you will pay off the whole amount the minute the store card bill comes.
Debt Specialists are continuously lobbying the financial regulators to raise interest rate warnings. They are of the opinion that statements for store cards should include a coloured underlined warning revealing their APR interest rate and what the holder will have to pay if only the minimum amount is made.
Subsequently if you do decide to accept a shop card be very aware how much it will cost you. We are aware that many British shoppers find credit cards to be a tempting way to get big savings on their purchases. But please, let us reiterate, always promptly pay off the full amount every month. Only this way can you be certain that you won’t fall into the store card debt trap