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Tackling your debts

Are you struggling with store card debt?

Posted 22 April 2016

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If you’re worried about store card debt, read our guide to find out what you can do about it.

It can be so easy to take out a store card, but, unfortunately, it’s just as easy to build up an unmanageable debt on it.

Perhaps it’s because, while you may think long and hard and shop around before taking out a credit card, you could be tempted to take out a store card impulsively. However, it’s vital you are not just as impulsive when you use it to splash the cash. In this blog, we will look at what a store card is and what you can do if you’re having trouble with store card debt.

What is a store card?

Store cards are a type of credit card connected to a particular shop, or brand. They let you pay for items at that store on credit and then pay it back at a later date. 

Confusingly, they are not the same as store-branded credit cards, which let you spend money anywhere. They are also different to rewards cards, which let you collect loyalty points when you shop at a particular store but are not a credit facility.

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Why get a store card?

If used responsibly, store cards mean you can enjoy advantages like money off your purchases, free delivery on online orders, a free coffee or cake in the store’s café, reward points – in fact, when there’s so much free stuff up for grabs it might seem silly not to get a store card.

The cards usually have a low spending limit, which means you can’t splash as much cash with them as you might with a credit card.  As with credit cards though, if you clear the balance in full each month you will usually pay no interest, so you enjoy interest-free credit from the date of your purchase until your payment date.

But that’s not to say you can’t get in trouble with them.  The interest rate on store cards is usually quite high – typically between 19% and 30% APR.  If you don’t clear the balance in full or, worse still, get into the habit of making just the minimum repayment each month, you may find that the interest charges quickly add up.

As with credit cards, if you are late with your monthly payment, pay less than the minimum, or miss a payment altogether, you will usually be charged a fee – typically £12 each time.

If you can’t pay the money back, store cards can land you in just as much trouble as a credit card or personal loan. Let’s take a look at what you can do if you get into trouble with store card debt.

Unmanageable store card debt

Missing your store card payments can leave you with a debt you may be unable to pay. The interest will continue to add up, and, as we mentioned, there may be penalty charges that make the bill even higher. It’s therefore important to make at least the minimum payment on your card.

However, store cards are not a priority bill like a mortgage or secured loan would be, and you shouldn’t have to sacrifice your spending on essentials like food and travel to pay your bill either. If you find that your bill is so high you can’t afford to pay your priority bills, speak with your store card provider to let them know that you are in financial difficulties. Together, you may be able to come up with a new and more manageable payment plan.

If you aren’t able to reach agreement with your store card provider, or other debts and spending commitments mean that you can’t afford to put anything towards your store card debt, it’s important you get professional debt advice. There are several debt solutions available, one of which may help you.

Our trained advisors have worked with many customers struggling with store card debt. If you’re looking for advice on how to get back in control of your unsecured debts, you’ll find details on how you can get in touch with us to the left of this page.

Protect your credit history

Another reason to seek help as soon as possible if you have a problem with store card debt is that late and missed store card repayments will affect your credit history. In fact, the impact is no different to that caused by missing a credit card payment.

When you apply for new credit, the lender uses one of the UK’s credit reference agencies to look at your credit history. They do this to see how responsible you are at managing money, which is just one of the things that helps them decide whether to lend to you. 

When you make a payment late or miss it altogether, this shows up on your credit history and stays there for six years. This may make you look like you are unable to manage your borrowing, which can result in the lender turning down your application. And because the missed payment will show up on your credit history for six years, your store card could still be impacting your finances long after you stop using it.

For advice on how to get on top of your store card debts, get in touch with one of our debt advisors using any of the options on the left.

 

 

by Kyri Levendi

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.