Exercise Caution With Store Cards
Store cards – the brand card that can hurt your wallet if not used with caution. Store cards are similar to credit cards as in they offer credit for goods and services to paid for at a later date. The major difference to their credit card cousins is that they can only be used in either one store or a chain of stores. UK store cards can also be used for the respective online store.
 Unlike credit cards, store cards already have a captive and often willing audience i.e. you are already in the store that wishes to sell you their card. Shop assistants already have a great incentive to sign you up for the relevant store card – they are paid commission for each card they sell. This guarantees that when approaching the till you are less likely to be met with an apathetic attitude to the benefits of the card. Another tool in a store’s armoury when it comes to selling their cards is the obligatory introductory offer e.g. 10% off your first months’ balance or a selected product line.
There are advantages to store cards if used prudently such as earning loyalty points that can be redeemed in store as well as the obvious credit that comes with the card. Ensuring that the card’s balance is paid off in full each month will result in avoiding interest charges and preventing any spiralling debt. Store cards can often reward loyal customers with selected discounts on merchandise as well as preferential treatment with regards to purchasing new products or clothing lines before they are on general sale to the public.
There are, unfortunately, pitfalls associated with store cards that heave to be avoided in order to enjoy the benefits. As a rule of thumb, store cards generally levy far higher interest rates (APR’s) than credit cards. Store cards also push their associated PPI’s (payment protection insurance) harder than credit cards. These policies are to cover monthly repayments in the event of redundancy or illness. However, these policies tend to represent poor value for money and are often unnecessary. Some PPI’s require an extreme set of circumstances to happen before they take over payments often leading with customers with a redundant policy.
Used correctly, store cards can often allow customers some flexibility as well as unsecured credit for a store or retail chain that they regularly shop at. Like all forms of credit, however, failure to meet repayments or use responsibly can lead to financial stress and problems down the line. With the high APR’s that accompany store cards, these warnings should be well headed for financial piece of mind.
Alisdair Milton
5th December 2006
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