Spending Carefully With Store Cards

It's the modern culture these days to get as heavily as you can in to debt, it seems. Everyone's doing it, with bank overdrafts, student loans, credit cards and, that scourge of the modern shopaholic, the store card.

In principle, the idea seems simple enough. You're out and about and you see a nice pair of shoes that you can just about afford, so you go up to the counter having taken a deep breath and accepted that you're going to spend some money today. Ok, it means that you won't be able to have your usual number of beers out with the lads for a couple of weeks, but everyone needs shoes, right?

But then the shop assistant strikes you with a proposition. She says that if you just fill out this form with your details, you can get a store card and a 20 per cent discount right then and there. 20 per cent? Bargain. Sign me up, you think. And that's when the trouble begins.

Store cards can be great, don't get me wrong. You can get special offers, discounts and get invited to the sales before anyone else so that you can pick up still more bargains. And if you pay off whatever you spend at the end of the month, then no problem. That's interest-free, possibly discounted shopping.

The problems begin, though, when you start to fall behind on your repayments. Of course, the same is true for credit cards. If you can't pay in time, you will end up paying extra for the privilege. The difference however is that with store cards the interest rates are significantly high - up to an eight per cent high according to personal finance advisors Moneyfacts.

"Most store cards will offer an introductory discount on your shopping, followed by special offers or loyalty schemes," explains Lisa Taylor, Moneyfacts analyst.

"But the downside lies in the rates of interest charged. The average store card charges interest at a whopping 24.6 per cent. Take for example an average store card, with an interest rate of 24.6 per cent requiring a minimum repayment of three per cent. To repay an initial balance of £500 would take a staggering 11 years and ten months, with the total repayable over double your initial spend, at £1,082.98."

So although the store card might seem like a convenient way to shop, they could be leaving you in a sticky situation. The sensible thing, as with all money issues, is probably to use store cards and the benefits that come with them, but in moderation. If your credit card is maxed-out and you're well into your current account's overdraft, then maybe going on a spending spree on your store cards is not a great idea. Just getting by with the minimum repayments is probably just going to land you in even more debt - and new shoes will only give you blisters anyway.