To be clear, this article does not refer to store loyalty or club cards, but specifically to store credit cards. Loyalty and club cards are usually a worthwhile venture for saving money, as it will give you access to points rewards or exclusive deals.
A store card is essentially a credit card that is branded with the issuing store's name. They can be heavily promoted within a store, especially if it a large chain, and can look quite appealing. However, there are a lot of downsides to store cards, and Money Dashboard have compiled a list of reasons to avoid them:
- Interest Rates The APR on a store card can be as much as twice as high as a competitive high street banking credit card.
- Hidden Facts Stores don't always make it clear what the APR or interest rate is, but you can rest assured it will be high.
- Aggressive Sales Shop staff are sometimes incentivised through commission to upsell the store card, so be aware that they are not just being helpful!
- Untrained Staff While they may be good at stacking shelves or directing shoppers, store staff are not likely to be trained in finance, and are not qualified to give advice on the dangers associated with high interest rates.
- Limited Deals To try to get you to sign-up without thinking, a store will offer a 10% introductory discount. This discount is temporary, and there are no further offers down the line.
- Young Prey Often these cards are marketed towards younger shoppers who don't have any other forms of credit and are not experienced at money management. It may not seem as fun, but your bank might be able to offer you a better deal.
- Restricted Use Store cards can only be used in the issuing store and maybe some affiliated businesses, they do not function as universal credit cards for other types of purchase.
- The OFT is concerned about them - The Office of Fair Trading is concerned about the sales tactics used here and advise you to take the forms away and read the small print carefully. If you do this, stores generally then refuse to give you the introductory offers!
- Christmas is coming - This makes it more important than ever to try to avoid using store cards wherever possible. This is because of the tendency to overspend when you enter the store for which you have a credit card .The reality of spending too much on store cards sinks in when you get your statement in January. Not such a Happy New Year!
- Excessive rates of interest - OK, this one repeats the first reason, but that's because it's worth repeating again and again and again.