A wake up call for store card users

Despite numerous warnings about the dangers of store cards, there are still around 11 million accounts in existence. While it appears that most consumers use their store cards with care, a survey conducted by www.fool.co.uk reveals that a significant minority may be sleepwalking into danger - 1 in 16 people who don’t know what their cards cost, also don’t settle their account in full.

There is some good news though - an overwhelming majority of store card users who responded to the online survey said they generally clear their balances in full. However, 1 in 9 people don’t. The survey also found that women are twice as likely as men to incur interest charges.

It seems that most people using store cards are financially savvy shoppers and quite clued up about interest rates. Nevertheless, 1 in 3 people confess to being oblivious to their store cards’ interest charges.

The survey also gained some valuable insight into why people take out store cards. Over three-quarters of respondents claimed they are enticed by discounts, and another 7% said they are attracted by the availability of instant credit.

Other reasons given for taking out store cards included incentives such as special preview evenings and loyalty points. Worryingly, around 3 in 100 shoppers yield to the pressure of pushy sales assistants.

But women should take note! They are probably twice as likely as men to be swayed by smooth-talking sales assistants. Amazingly, the survey also found that 1 in 100 people thought their store card is a reflection of their status.

David Kuo, Head of Personal Finance at Fool.co.uk says: “Store cards can be an important marketing tool for retailers who appreciate the importance of building customer loyalty. Consumers also recognise the many benefits of taking out store cards. After all, it can be hard to pass up on an introductory discount if you are buying expensive items.

“Our survey shows that by and large store card holders are getting the gain without any of the pain. In general, store cards don’t pose a problem if you pay off balances in full within the interest-free period, which is typically around 56 days.

“But a significant minority may find that any benefits they had initially hoped for have been eroded by high interest charges because they have not paid off their balances in full.

“So if it is going to take a few months to clear your store card balances, then it makes sense to take out a 0% card even if you have to pay a balance transfer fee. A one-off 2% balance transfer fee is considerably better than paying 2% interest charges month after month.”