Debt Views

Plastic is a convenient form of spending, but when it comes to store cards it can be extremely expensive. A store card is a credit card branded with the name of the store that issues it and is useful to purchase only goods in that store, or chain of stores. Store cards work much the same as credit cards from major companies, although store cards generally have high annual percentage rates (APRs) and often have short interest-free grace periods.

Signing up for store cards

The big incentive to sign up for a store card is a discount on your purchases the day you apply: Up to 10 or even 15 per cent in some cases, which can be quite a saving if you are spending a lot of cash. But if you don’t clear the balance when your statement arrives, that initial discount could easily be eaten up in interest because store cards have high APRs.

Store cards are ‘sold’ to you by sales assistants, many of whom are on commission so the more customers they can persuade to sign up, the more lucrative it is for them. The sales assistant usually fills out the application form on your behalf while you supply your details, then calls to check your credit rating while you wait. If you’re deemed a good enough risk, the card is authorised.

Paying extortionate rates of interest

The main problem with store cards is that it often isn’t clear when you sign up in store exactly what the APR is – the amount of interest you pay. It is rarely clearly advertised, and the rate could mean a nasty shock when your statement arrives because rates tend to be extremely high. And if you don’t pay off the balance in full, you could pay a lot extra.

While APRs on credit cards have fallen dramatically in recent years, rates on many store cards still hover around 25-30 per cent mark – around 50 per cent more than those on most credit cards. Although the rate drops slightly if you pay by direct debit, in most cases it remains well over 20 per cent.

Making store cards work for you

If you can comfortably clear the outstanding amount on your store card when the bill arrives and are a regular customer of that particular retailer, it may be worth using a store card, as there could be plenty of benefits in doing so.

Not only do you get a discount on your first purchase, there are usually other perks, such as bonus reward schemes, free catalogues or magazines, and special shopping days, where you can avoid the crowds and shop in peace. Some retailers have launched credit cards alongside their store cards so you get the usual rewards of a store card for spending on the retailer-branded credit card. The danger is that while the APR tends to be lower than on a store card, it isn’t as cheap as some of the best credit cards.

And as you aren’t restricted to one store but can use it in whatever outlets you like, you could run up more debt on it than you were able to before. Check the APR before spending – and if it isn’t that competitive (and you don’t clear your balance every month) don’t use it at all.

Set up a direct debit to pay the full amount due on your store card each month. Then, if you forget to pay one month – perhaps because you’re on holiday – it will be paid regardless so you won’t run up any interest.

Here, on our website, you will find accurate information on over 300 credit cards, plus loans, insurance and mortgage deals for efficient personal finance management.

Article Source: http://EzineArticles.com/?expert=Liza_Mathers