Tackling your debts

Store cards – are they worth it? Part 2

Posted 26 August 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.

Last time we showed you why you might be tempted by a store card. This time we’re going to show you how to use your store card so that it works for you. And, we’re going to give you suggestions about what you can do if you already have unmanageable store card debts.

How to use store cards to your advantage

While there can be disadvantages to using store cards, they’re not all bad. In fact, if you use them correctly, there can be a real advantages. And there is a really simple way you can enjoy all the benefits it has to offer, without the pitfalls. 

The first and most important rule you should follow is always try to pay off the outstanding balance in full within the interest-free period. Usually, if you do this, you’ll not pay anything extra on top of the amount you actually spent on the clothes – no charges and no fees!

To do this, it’s best to make sure you have the money available to pay off the purchase, in full, before you plonk it on your card. If you do, no problem. If you don’t, and you intend on paying what’s left in monthly instalments, it’s already costing you more money than it should, as you’ll start paying the high interest rate on whatever balance you’ve not cleared.

And, if you don’t set up a direct debit to make your payments, as soon as the bill comes, you could risk forgetting about it, which would lead to late payment charges.   

So set-up a direct debit and make sure you pay off the full amount each month.

What to do if you’re already struggling

If you’re already struggling with store card debt, and you’re not managing to pay what you owe each month, it’s vital you don’t ignore the situation. The interest will only pile up higher and your credit rating could be damaged as a result. Missing, part and late payments can all be noted on your credit file, so if you try to take further credit out in the future, you may find it more difficult. 

One way to clear your store card debt might be by transferring your remaining balance on to a 0% balance transfer credit card. By doing this, you’re moving it from a high interest card on to one that’s going to cost you nothing, at least for a period of time anyway. But, you need to make sure that you make a note of when the interest free period runs out, so that you have plenty of time to prepare or make alternative arrangements.  Ideally, you should aim to clear the whole balance by the end of the interest-free period.

If you think it might take you much longer than any interest-free period offered, you could consider transferring again, once the interest-free period is up. But this can be a risky strategy as you’ll have to rely on being accepted by another card company. 

You also have to keep in mind that you’re likely to have to pay a transfer fee to switch your store card debt over to your new credit card, and there may be other terms you have to meet. Make sure you read all the terms and conditions when working out whether or not you will save money by using a balance transfer card.

When credit’s not an option

However, it might be the case that you’re not in a position to use a balance transfer card. Perhaps your store card debts have spiralled and you’ve defaulted on (missed or made partial) monthly payments, or maybe you’ve had problems with other debts in the last few years. Either way, if your credit rating has been damaged, you may find it difficult to borrow more or to be accepted for a card with an interest free (or low interest) deal.

There are still options available to you though. In the first instance, you should try and talk the situation through with your store card provider and see if you can come to an alternative arrangement, such as paying less each month over a longer period (although this could cost you more interest overall).

Alternatively, if not being able to pay your bill is a temporary thing – perhaps because you’ve lost your job, but you’re looking for a new one – you might be able to agree a payment holiday with your lender, although this will depend on their own terms and conditions.

If this doesn’t work, or isn’t something you feel able to do, you might want to consider using a debt solution. There are numerous debt solutions available – some of which will require a fee – that can help you manage your debts more easily. Which one is right for you depends on your circumstances and they all affect your credit rating for a period of time. But, if your debt is spiralling, the most important thing is not to bury your head in the sand and hope that the problem will go away.

If you’re not sure what to do, the best advice we can give is speak to a debt advisor. They’re trained to know what questions to ask so that they are able to give you the best solution. We have advisors ready and waiting to help, just choose which way you’d prefer to contact us from the left hand side of the page.

by Shelley Bowers

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