Store card point-of-sale discounts to be banned A new agreement restricts store card discounts

23 November 2011

Shopping street

New rules will restrict how shops offer discounts through store cards

A range of measures announced by consumer minister Ed Davey will stop the use of discounts at the point of sale to encourage people to take out store cards. 

The announcement comes after a recent Which? Money report found high interest rates up to 60 times the base rate and a range of fees on many popular store cards.

Mr Davey said: 'Following negotiations with the Government, industry has agreed to end this practice as well as introducing other measures to improve the way store cards are offered, including a good practice training scheme and a ban on direct commission for sale staff.'

Discounts delayed

Following a voluntary agreement between the Government, the British Retail Consortium and the Finance and Leasing Association, consumers won't be able to redeem discounts offered by taking out a store card until seven days after the initial purchase.

Which? Money editor James Daley said: 'Instant discounts are one of the biggest attractions of store cards, so banning them could sound the death knell for these cards. They could start to become more like loyalty cards with a credit card element on the side.'

Poor quality product

A recent report by Which? Money found the high APR's and lacklustre offers from store cards mean that any savings you might be able to make using them will be wiped out in months for those who stick to low minimum repayments. For example, the discount from an Evans store card would be overtaken by interest within two months. For Laura Ashley, that figure was 3 months.

Store cards, like credit cards, also come with a range of fees. Late payment fees typically come to £12, as do those charged when you exceed your agreed credit limit. All Santander-issued cards also charge a £25 trace fee if you move address and fail to inform them, as well as a £10 credit balance fee if your account is in credit for three consecutive months.

There are also fees if you withdraw money using your store card. Debenhams, for instance, offers you a 'cash advance', but will charge you 3% or £3 (whichever is lower) in addition to charging you interest at a higher rate of 28.8%.

Smart spending

Until the new rules take it can be worth grabbing store card discounts this Christmas provided you pay off the full balance within the interest-free period and close the account.

Topman's card offers 15% off your first purchase, while New Look gives 20% off your first purchase. The best deal for sale items is at Burton, where you'll get a generous 10% off sale items throughout the year.

Some store cards also offer ongoing reward schemes, giving you points on your shopping. Best of the bunch is House of Fraser, which offers a reasonable three points per £1 spent in store and a competitive six points per £1 spent online. So, on top of the £10 welcome voucher, £333 worth of spending online will get you another £20.

More on this…

• Cashback credit cards – Rather than relying on one-retailer get cashback for all your shopping
• Best-rate credit cards – If you can't afford to pay back in full, stick to a low-rate card
• 0%-on-purchases cards – Don't rely on store buy-now-pay-later deals, use a 0% interest card instead