‘Extortionate’ interest on store cards

10 December 2007

Study shows Christmas shoppers with store cards will have interest bill of £2.8bn next year

A new study has shown that those who use store cards to pay for their Christmas shopping will face a total bill of £2.8bn next year - nearly two thirds more than the interest paid by those with credit cards.

Store cards are offered by most major retailers and have an average interest rate of 26%, more than double offered by the average credit card.

This has caused consumer groups to criticise store cards for adding pressure to those who are already in too much debt.

However, nearly 15 million store cards have been issued; double that of five years ago. This is the result of stores offering the cards to everyone at the tills, with staff being “constantly reminded” that it is part of their job to do this. To encourage customers to get a store card, sales staff are instructed to highlight the free perks and the interest-free period of up to two months that come with the card.

Earlier in the year, the Competition Commission ordered that all store cards with an APR of over 25% must come with a ‘health warning’ on the card itself.

Director General of the Finance and Leasing Association (FLA), Stephen Sklaroff, said: “For many consumers, store cards represent good value, and provide a variety of benefits. For some people a store card can be a good way of starting a credit history of responsible money management.”

Some consumer groups do not agree with this and suggest that the cards present a ‘money trap’.