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Store cards to carry a wealth warning

Despite store credit cards being a very expensive piece of plastic over 11 million people in the UK today own one, and it’s estimated they cost British shoppers at least £55 million a year in interest payments alone.

The annual percentage rate (APR) on the average store credit card stands at 24.30%, which is 7.58% higher than the average credit card rate of 16.72%. Lets take a look at some of the rates charged on store cards on the market today:

Store cards with a wealth warning

Last year the Competition Commission warned that store credit card interest rates were far too high, and from the 1st of May,  it’s become compulsory for all store credit cards charging over 25% APR to carry a ‘wealth warning’, where they must:

• Include interest rate warnings on every monthly statement, advising cardholders that cheaper credit cards can be found elsewhere.
• Provide a summary box which will display all interest rates and penalty charges, and also warn of the dangers of only making the minimum monthly repayments.

These new rules will affect around two thirds of all store credit cards, and are a step in the right direction to make the dangers more clear. The bad news is that these warnings don’t have to be made known before you sign on the dotted line. Some stores also reduce their rates in an attempt to get around these new rules. Russell & Bromley for example decreased its card’s APR to 23.9%, and Laura Ashley cut its card’s APR to 19.9%.

So the message is – don’t take out a store card!

Taking out a regular credit card is a far cheaper option.

Store card vs credit card (£1,000 balance)

What to do next

As tempting as it may seem to take advantage of a small discount on your initial purchases with a store credit card, unless you intend to pay back the balance in full store credit cards are an expensive luxury you’d be better off without. If you have a large balance outstanding, consider a 0% balance transfer credit card. Moneyfacts compares over 200 credit cards available, so take some time to find out about credit cards and compare our credit card Best Buys to find a credit card better suited to your needs.

Your wallet will thank you, although your store won’t!