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Top 5 Reasons to Avoid Store Cards


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Store cards are a form of credit card where a consumers can spend on the card and then either repay the balance in full at the end of each month in order to avoid interest, or can spread the repayments on the card over a period of time, in which case interest will be charged on the balance until it has been repaid in full. Although more and more shops are now offering store cards, there are not many benefits to having these cards and they can quickly lead to mounting debt for the consumer. Below you will find five of the top reasons to avoid taking out store cards:

1. The interest rates. The rate of interest charged on most store cards if the balance is not repaid in full at the end of each month can be extremely high, and can quickly add to the balance, leaving the cardholder in increasing debt. Those that make minimum repayments on the card will fare particularly badly as they will be the ones that are hit hardest by the interest payments.

2. Temptation. Store cards are well known for increasing the chances of impulse buying, and many sales staff at shops bank on consumers’ impulsive streaks in order to get them to sign up for a card. When you sign up for a store card you often end up purchasing something you would otherwise not have bought simply because the salesperson offers you a discount for taking out the card. In addition, future discounts may encourage you to make purchases that are unnecessary, and if you don't repay the balance in the interest free period any discount will be counteracted by interest charges anyway.

3. No cash transaction facilities. A store card does not enable you to make cash withdrawals and transactions, and this means that if you need cash in an emergency you will certainly not be able to rely on your store card. You would be far better off with a credit card, as this allows you to withdraw cash or make cash transactions should you need to, although these are best avoided wherever possible due to high charges that are applied.

4. Restrictions of use. With a store card you are very restricted in terms of where you can use it. You can only use your store card in a particular shop or chain of shops, and this means that you have very little in the way of choice. You may be able to get the same or a similar product cheaper elsewhere but may end up going for the most expensive one simply because you have a store card for that particular retailer.

5. False economy. Many store cards offer a range of discounts to cardholders when it comes to their products. However, unless you tend to repay your balance in full at the end of each month -in which case you would fare far better with a rewards based credit card due to increased freedom and a choice of rewards- any discounts would be counteracted by the very high rates of interest charged on your balance.

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