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Store cards are a type of credit card with certain unique characteristics.
While a credit card will allow you to spend anywhere where the card's payment network (Visa, MasterCard, American Express, etc...) is accepted, a store card will only allow you to spend in the shops of a retailer or retail group. But the differences don't end there...
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A store card may be appropriate if: |
A store card is not appropriate if: |
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If you've got a big purchase coming up that you won't be able to repay for a few months, a store card can be a tempting option.
However, it may be worth considering whether a credit card offering an introductory 0% on purchases would be better before you make a decision – there's no point saving 10% on your purchase, only to pay 20% in interest!
While some cards do offer introductory rates and interest free terms on large spends, you would be wise to follow these golden rules:
| 1) Pay off the balance in full each month – The APR on store cards can be very, very expensive. You don’t get introductory 0% periods like you do with some credit cards, so it’ important to pay back what you borrow in full, every month. |
2) Transfer balances – if you’ve got store card balances that aren’t getting repaid, a more cost effective way of repaying would be to transfer your debt to a credit card with a long 0% balance transfer deal. Make sure you cut up your store cards and cancel them once the balance has moved across, to prevent you spending more. |
3) Pay by direct debit – Some store card providers charge a higher APR if you choose not to pay by direct debit. Store cards are an expensive way of borrowing as it is, so don’t give card providers an excuse to charge you more! |
In the past store cards have been heavily criticised. If you can, do it the old-fashioned way and save up before you buy – that way you won’t have to worry about eye-watering interest rates.
Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.
