Store Cards
While out on a spending spree, most of us have reached the till, arms laden with high heels, video games, or whatever else takes our fancy, only to be confronted by a cheery shop assistant, an ingratiating smile and those familiar words: “Can I interest you in a store card at all?”
Store cards enable you to buy any goods from a particular shop on credit. Rather than acting as a general purpose credit card, a store card is specific to one shop or group of shops owned by the same company. So, if you’re shopping and don’t quite have the cash to cover what you want, a store card enables you to buy now and pay later.
To be honest, the offer is often tempting. You needn’t pay up front and if you sign that form you can often get at least 10 per cent off your first purchase. Let’s face it; none of us like to miss out on a special offer and the idea of something for nothing is an appealing spiel that confronts us every day. However, the reality of store cards is often a lot harsher than it may appear.
While you may think that you, the customer, is winning by getting that card, it’s worth remembering that the person who you’re signing away a bit of your credit history to is most likely on commission. For every person they can convince to take a store card, they’ll earn a little more cash. No sane shop will pay people to do this unless it’s them which ultimately profits.
Paying on plastic means it’s easy to overdo it. Each time you buy something on your storecard, you don’t seem to have used any money. Useful as this can be from time to time, it isn’t much of a leap from a few pounds to a few hundred pounds. You are, after all, spending money that you can’t see and that you might not even have.
Each month, you’ll receive a statement billing you for all those things that you’ve used your card to cover. Rather than borrowing on your card, and only paying off the minimum amount, you should always completely clear your account if you are going to have a store card. According to www.moneysavingexpert.com, out of the 31 major store cards on the high street, 20 charge between 25 and 30 per cent interest on all outstanding purchases - significantly more than a standard credit card. Perhaps it would be worth thinking twice about using something described by the National Consumer Council as: ‘the next worst thing to a loan shark if you judge them on the interest rates that are charged'.
With every passing day, those charges can mount up and up, leaving you with some pretty hefty debts. You may get money off the first time you use your card, but each subsequent use can end up costing you a great deal more than you seemed to gain with that original discount.
Lumbering yourself with debt when only in your teens is quite a risky business. In a time when most 18 to 24-year-olds already owe an average of around £2,860 in unsecured borrowing (according to debt advisers One Advice), getting tied down by store cards can lead to money worries and bad habits in years to come. Keeping tabs on your money and learning to spend only what you have is a vital skill. This can be undermined by a constant barrage of incentives to buy anything you want on the never never.
Signing up to a large number of store cards doesn’t have to be a bad idea. Provided you pay off all your accounts, each storecard can bring significant perks. For example, many stores offer a wide range of membership benefits, such as invitations to launches of new product ranges or free quarterly magazines, giving you the chance to see the latest styles before anyone else.
Signing up for too many store cards in a short space of time can damage your credit rating. If too many consecutive checks are run on your credit record (not to mention any repayment problems you could get into) you could end up jeopardising your chances of taking out a credit card or - dare I say it - a mortgage in later life.
Of course, if you can trust yourself to pay off all of your debts and use them wisely, there is no reason not to take out a store card or two and make the most of the benefits that they offer. But if there’s the chance that clearing that balance might just be another thing pushed to the bottom of your to do list, it might be best to steer clear.
Why not just buy what you can, and save the hassle and responsibility of having to deal with bills for another few years? I know I shall.