People in the UK have been warned to look further than initial promotions when looking to pick up a credit card in order to avoid falling into store c…
People in the UK have been warned to look further than initial promotions when looking to pick up a credit card in order to avoid falling into store card traps and credit card debt.
Price comparison website MoneySupermarket has examined the interest rates across a variety of retailers' credit and store cards and has found shoppers could be making big savings if they simply look beyond the appealing introductory offers and study the small print.
The representative interest rates on store cards analysed by MoneySupermarket.com ranged from 19.9 per cent to 29.9 per cent APR, which could allow a shopper to build up £141.07 in interest over 12 months if they make £500 worth of purchases.
Some retailers offer their own credit cards, which appear to give a lower rate of interest compared to store cards. The deals are usually very appealing with things such as initial interest free periods and rewards for making purchases. For example, the Marks & Spencer credit card has a representative APR of 16.9 per cent and purchases are interest free for the first 16 months.
However, although many of these cards have ongoing rewards schemes the interest free period invariably runs out and this could potentially lock an individual into a large amount of debt if they are not careful.
It should be said that store cards can offer great savings with their introductory deals. However, most will only really benefit if they can afford to pay off the full amount at the end of the period.
MoneySupermarket noted the New Look store card offers customers 20 per cent off their first purchase when signing up to the card, while the Homebase store card gives the customer £60 worth of vouchers straight away. These offers can be very tempting but it is important to understand the dangers of using a card that accrues large amounts of interest.
Kevin Mountford, head of banking at MoneySupermarket, said: "Shoppers should be wary of the high interest rates that come with store cards, which will negate the advantages if the balance is not repaid in full."
By Amy White