Tackling your debts

Store cards – are they worth it? Part 1

Posted 01 October 2015

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Store cards may seem tempting, but they could add up to a problem debt, if they’re not used correctly.

Store cards – are they a good deal or not? They may be tempting, offering you a 10%, or even 20%, discount on your purchases, which can add up to a considerable saving, making your money stretch further. Great, right?

But, have you read the terms and conditions? Do you know how much interest you’ll pay, if you don’t pay off the whole amount on one go? And what about if you miss a payment, pay late or are only able to pay part of what’s due?

If you don’t know the answers to these questions, you should read this two part series before getting a store card. If you’ve already got a store card, and you’re struggling to pay what you owe, wait for part two, where we’ll show you how to use the card so that you never pay more than what you've spent initially and give you ways to deal with any store card debt you’ve already got. 

Store cards, what’s the attraction?

A store card is like a credit card, you’re able to spend on it up to a certain limit, which is decided by the card supplier and, as we’ve mentioned already, you’ll more than likely be given an introductory discount. When you start spending, the card allows you to spread the cost of your spending over a period of time, making it more affordable for you to get the stuff you need.

You may also receive exclusive card holder benefits and special offers, which, if you shop there regularly, could give you some great savings. For example, every time you use a Debenhams store card, you’ll earn points, earn reward vouchers, get free delivery if you buy from, get 10% discount on café and restaurant purchases and invitations to special events amongst other perks.  

Once you’ve spent on the card, it’s time for the painful bit – paying it back. You must repay what you’ve borrowed, plus any interest, in monthly payments, making sure that it’s at least the minimum amount each month. If you can pay off the whole amount in one go, when it becomes due, this is even better, as this should mean you should avoid paying any interest.

And, as with credit cards, if you pay late, only pay part of the amount due, or don’t pay at all, you will more than likely be facing further charges. And you could also be subject to charges if payments are returned as unpaid.

However, unlike a credit card, you’re usually limited to spending the money at one store or group, so it’s only worth it if you really like that shop and can see yourself buying lots of things from there. Remember, having lots of cards open, but not being used, can have a negative effect on how lenders see you, if you’re trying to take out new credit.

And finally, store cards often have higher interest rates than some credit cards. In fact, many of them have APRs of over 25% – and some charge even more! This can quickly add up if you’re unable to clear your balance within the initial interest-free period and your balance could end up becoming a problem debt without you even realising it.

So, now we’ve explained how store cards work and why you might be tempted, we’ll leave you to digest that information. Next time, we’ll look at how you can use store cards so that they don’t become a problem debt and what to do if you’ve fallen behind with your payments.

by Shelley Bowers

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