Consumer store card advice guide

R3, the insolvency trade body, has issued a consumer advice guide on store cards that provides consumers with useful tips on how to make the most out of the store cards and how to avoid getting into financial trouble.

Our survey shows that 66 per cent of R3's members have dealt with insolvency cases where people have signed up for a store card without understanding what they had let themselves in for.

Nearly 80 per cent (78%) of insolvency practitioners believe that consumers view spending on store cards as less ‘real' than spending in cash and so unwittingly go over budget. As a result of our findings R3 has called for a ban on the irresponsible practice of allowing financially unqualified shop staff selling store cards.

R3 President, Peter Sargent, commented: "Offering store credit at the point of sale means that many vulnerable consumers do not grasp that they are entering into a legally binding contract. Store cards must be handled just like any other credit card.  This advice guide was designed to make consumers stop and think. We can't stop people from using store cards but we can show them how to make sure the store card works for them."

Before you take out a store card R3 advises you to:

Take the application form away with you so that you can read it at your leisure. Don't be pressured into signing straight away.

See if there's an interest-free period, and check what the interest rate will be afterwards.

Remember to check the penalties for default and late payment.

Remember that the smaller the repayment you make, the longer you will be paying the money back and the more expensive it becomes. In some cases, if you only make the minimum repayment you will only be paying off the interest.

The advice guide can be downloaded from R3's website: r3.org.uk.