Store cards What are store cards?
Many high-street retailers offer store credit cards
What are store credit cards?
Store cards are an easy form of credit offered by many high-street retailers, often at the point of sale where consumers are encouraged to take one out to get discounts on purchases.
But with APRs as high as 30.9%, some are more than four times more expensive than the cheapest Which? Best Buy credit card – charging interest rates that are some 60 times greater than the Bank of England base rate.
How store cards work
Store cards are a form of credit card given out by shops to customers, often offering discounts on in-store purchases.
They shouldn’t be confused with loyalty cards, such as the Nectar card or Tesco Clubcard, which reward you based on how much you spend. Nor are they the store-branded credit cards, such as the M&S MasterCard, which can be used anywhere.
Store cards usually offer lower credit limits than traditional credit cards, but come with very high interest rates. And unlike credit cards, which that are usually distributed by trained bank staff, store cards are given out by sales staff in high-street stores.
Store cards are too expensive and too easy to obtain
Too expensive and too easy
While the interest rates are unnecessarily high, the real problem is the accessibility of store cards. You can sign up for a store card at the checkout and start spending there and then.
And while shop assistants are supposed to ask for permission to carry out credit checks, this doesn’t always happen.
The average APR on store cards is 25.2%, compared to 16.8% on credit cards. The highest rates are just under 31%.
These rates are so high that, following a Competition Commission investigation three years ago, any providers with interest rates higher than 25% must provide a ‘wealth warning’ on their statements.
These wealth warnings must advise customers that cheaper rates of borrowing can be found elsewhere and warn of the dangers of only making minimum payments.
These high rates of interest make store cards a poor way to borrow money (see table, below). Yet the Finance and Leasing Association (FLA) estimates there are 14.6 million store cards in circulation, with around £3bn worth of transactions made on them.
