Author: Richard Norfolk

Read the title again and then keep it firmly in mind. Do not rush into owning a store card. Consider your decision very carefully, and always bear in mind that the use of any credit card is quite likely to have cost implications for you.

First of all we should be clear about what we mean by ‘store cards’. There are two main types – the usually innocuous type most often called Loyalty cards, and the far more ‘dangerous’ credit style card. The loyalty card is not being considered here because it does not normally act as a means of separating a customer from their hard earned cash.

This is the card where typically you get points based on the amount you have spent and can let these points build up. Then, when you have sufficient you can then use them for an in store purchase or discount. This is a harmless little perk which rewards you for repeatedly shopping in the store.

The credit style of card is a very different kettle of fish. Often they are afforded some camouflage by having loyalty card type benefits included in their system of operation. Thus the store may make a big point out of the fact that using their card will get you a discount on your purchases ‘today’, ‘this week’ or even ‘this month’. They are unlikely however to have anything approaching the same level of publicity regarding the potential costs to you should you fail to meet their payment dates.

The cost of late payment can be horrendous – the Annual Percentage Rate (or APR) can be as high as almost 30% on some store cards, which does not compare well with the usual credit card rate of 15% to 20%.

However, credit cards are now most definitely a way of life and it cannot be denied that they are very convenient. They can enable purchases which would otherwise have involved drawing the requisite amount of cash from the bank – although some husbands may say that this can be a bit too convenient at Sales times! The disappearance of so many bank branches will have given an added attraction to the credit card.

How does this affect store cards? Where once debt was regarded as shameful and to be concealed, the increased use of credit cards has got people used to the idea. Many people run into the red on their card and have to pay interest on top of their repayments.
This procedure then ‘rolls over’ into their use of store cards, and they find to their dismay that their payments are now being hit by the high interest rates. If they then find it impossible to pay the outstanding balance in full at the month end, the interest charges can accumulate and extremely serious problems can result.

Don’t forget that the inability to pay can hit you like a bolt from the blue. You may be jogging along happily, buying the items that you feel that you need and paying off your store card at the due time – then WHAM – redundancy, illness, family problems, loss of earnings. Through no fault of your own you cannot pay the amount due.

It all sounds like terrible ‘doom and gloom’, but treat it as a warning not to go in for any financial commitment until you have thoroughly studied your options.

Don’t be swayed by short-term benefits which lead you into long term problems. Are they really benefits, or is the store price higher than the price charged by their competitors? Ignore ‘pie in the sky’ rewards which you may never qualify for.

Unless you have reserve ‘rainy day’ money which can be accessed instantly to cover payments due, you may well have to face interest charges if you fall behind with payments because your income drops – just the time when extra costs are the last thing you need.

However, be prepared to sign up to a store card which offers a good discount on an item which you were going to buy anyway, but control the situation. If necessary you must take your discount and ensure that you make all your payments when due. Then cut your store card up, to avoid being dragged into the deep water of debt.

If you want to have credit then look closely at conventional credit cards and especially at the interest charges they make.

Consider, consider, consider. It’s your money – use it wisely.

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