Store Cards
What are Store Cards? Be aware of the following before applying for a Store Card| What are Store Cards? | Top |
Store cards are a form of credit card that are issued by a particular store or chain of stores for use in purchasing goods in that store or chain of stores. In the early days of store cards you were not given credit, and the balance on the store card had to be paid off every month. These days times have changed and store cards act much in the same way as credit cards, you are assigned a credit limit by the issuing store, there will be a minimum payment to be made against the outstanding balance of the store card, and it is up to you whether you wish to pay the minimum payment, some of the outstanding balance or all the outstanding balance each month.
As with a credit card, the majority of store cards give interest free periods of time, which are usually between 34 days and 56 days. The major difference between a credit card and a store card is where you can use it. There are virtually no restrictions on where you can use your credit card, whereas in the case of a store card you can only use it to purchase goods within the confines of the store card issuer’s store or stores and you cannot purchase goods with it at any other store.
Research by the Competition Commission published in March 2006 shows the number of active store card accounts is declining (there were 11.4 million such accounts at the end of 2005 compared with 17.5 million at the end of 2002). The commission also found that some 57% of store cardholders who used their card in a particular month took on interest-bearing credit. The remaining 43% settled their balance in full and did not incur interest changes (Source: Competition Commission 07/03/2006).
| Be aware of the following before applying | Top |
IThe interest rate charged by the store card may be a lot higher that that of a standard credit card. You should always check the Annual Percentage Rate (APR) and compare it with other forms of credit before you sign on the dotted line for a store card. The higher the figure, the more interest you will pay.
Instore sales assistants will most likely try and persuade you to apply for a store card by offering incentives like:
A discount, usually 10%, off the price of your first purchase.
You will be awarded 'Points' for each purchase you make with your store card, and when you have accumulated a certain amount of ‘Points’, you can exchange them for store vouchers or obtain discounts on purchases made at the store.
As a store card holder, you will be given priority at special events, such as store card holder only evenings.
Sales assistants may be paid a commission to sign customers up to the store card, so it is in their interest, not necessarily yours, to highlight the benefits of the cards. Don't take every thing the sales person says about the store card at face value, dig a little deeper and thoroughly check it out.
You may be offered payment protection insurance to cover payments in the event of an accident, unemployment, sickness, etc. The premium is usually added to your account on a monthly basis and is calculated as a percentage of your outstanding balance. Always read though the full terms and conditions associated with the store card. Make sure it is the right one for you and that you qualify for the cover.
It is advisable to pay off the balance of a store card every month, or if that is not possible, as much as you can afford, even though your store card statement will specify a minimum payment. Because the interest rate is high on store cards, only paying the minimum amount will leave you with an increasing debt which could take you a long time to clear.
