Store Cards – Pros & Cons
Topshop, Debenhams, Warehouse, Dorothy Perkins, Burtons, what do they all have in common? Store cards. So when you are out shopping and the lure of that new party dress is calling you but hey, there’s one small problem, you’ve no cash, what do you do? Whack it on an old credit card or take out one of the shops enticing store cards? With these cards typically offering an introductory offer of 10% off your first purchase and 56 days interest free, what could possibly go wrong? Well bearing in mind that store cards were featured on last Thursdays Watchdog on BBC1, it seems quite a lot. So let’s look at the cons first and then see if there is anyway to use these cards to our advantage.
With an APR of around 29.9%, store cards have a much higher interest rate than usual credit cards so why would you take them out in the first place? Well, it’s usually because you’ve seen that one-off purchase and the shop is offering a discounted rate to go with the card. But think about it, is it really worth getting a paltry three quid off a £30 dress to pay the extra interest on every other purchase you make? Martyn Lewis from moneysavingexpert.com has a great idea. Go with a group of friends where you all choose clothes you want to buy and one of you applies for the card. Your friends give you the cash, getting the discount, you then pay off the balance in full and in the next shopping trip another friend applies for the card.
Make sure you check your statement regularly. Highlighted on the Watchdog programme were the amount of administrative errors that Santander (the bank responsible for the majority of store cards) were making. It is important therefore, for you to check every purchase and every payment you make to the card company. Do not assume that payments are being processed and look out for late payments charges made in error. This was one of the most complained about matters and typically took a very long time to resolve.
Lastly, did you know that there is a little known clause in most store cards called the ‘Dormancy Fee‘? This allows store cards to charge you if you do not use your cards within 6 months. Outrageous? I thought so too. The fee is £10 and apparently Santander say they have no intention of using it. However, it still remains in the terms and conditions.
My advice is, if you are going to get a store card, use it once for the promotional discount, pay it off in full then cancel it, don’t just cut it up. The APR is way too high and you can get a ‘normal’ credit card which does exactly the same thing with much cheaper interest. If you already owe money on a store card then apply for a high street credit card and transfer the balance to one with a cheaper APR. Note, to cancel a store card owned by Santander, call 0113 280 7080.
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