Store card warning

As UK consumers continue to feel the effect of the global credit crunch, many could be in danger of getting themselves into further financial difficulties as they try and save a few pounds over the short-term, experts have warned.

Though the prospect of saving anything from ten and 20 per cent on a day's shopping may seem extremely tempting for a majority of consumers, should the offer involve taking out a store card, this may not be quite the great deal it initially seems.

In contrast to a host of lenders, including Barclaycard, who have significantly tightened their lending criteria so as to minimise their exposure to the credit crisis, many high street stores are still offering their customers store cards with credit limits stretching to hundreds of pounds, often with minimal checks to see whether or not the consumer can afford such a deal.

In fact, despite all the warnings from consumer groups and financial advisors, the number of store card accounts open in the UK has almost doubled over the past five years, from seven million to the current level of £13.4 million, with the total amount of credit outstanding on these cards standing at £2.17 billion.

According to the independent financial advisors Thomas Charles, store cards are one of the most expensive forms of borrowing and should be avoided at all costs, regardless of the short-term benefits on offer.

James Falla, chief executive of the firm, stated: "My advice 100 per cent is don't take out a store card full stop", adding store cards are among probably the worst deals available.

"The average store card is 29 per cent APR. It's very, very high, and you get sucked in to those things because the classic sales technique is: 'Do you want ten per cent off your purchase today?' Of course you do – who would not want to save ten per cent? But in order to get that ten per cent off, you need to take out a store card."

Should the temptation prove too much, consumers who take out store cards are advised to keep on top of their accounts and pay off any outstanding amounts in full, rather than just taking care of the minimum payback amounts, as is often the case with other credit cards which charge an average APR of just 16 per cent.

Fortunately, the days of Britons getting sucked into thousands of pounds worth of debt after just a couple of irresponsible days on the high street, look like they are coming to an end.

Alongside the growing amounts of financial advice on offer, whether it is given on TV watchdog shows or in specialist financial magazines, store cards which charge more than 25 per cent APRs must carry "public health warnings", meaning anyone who gets into such difficulties in the future really has nobody to blame but themselves.