Should You Get A Store Card?

You've probably been offered a store card at some point in your adult life. Usually brought up by the cashier at the point of sale, they'll try to entice you with the offer of a discount on today's purchases if you sign up there and then. It sounds like a good deal; get 20% of all your purchases in that store, and pay for them later on.
But in reality, a store card is nothing but a high-interest credit card which can only be used in one shop, commonly a clothing store. The average store card APR can be as high as 29.9%, compared to the credit card average which falls between 15.9% and 18.9%.

The sales assistants who offer you the cards are rarely trained in personal finance, and certainly not to the degree bank cashiers are. A mystery shopper study carried out by This Is Money in 2011 revealed that only one of the seven high street stores tested actually required their assistants to give full information about the card and what credit checks can do to a credit rating. The rest skirted over important information like this and, in one case, told the mystery shopper nothing about the card prior to her signing up.

This is worrying as many consumers are unclear about the difference between credit cards, store cards and loyalty cards. A loyalty card, such as the Boots card or Nectar card, gives you points with each purchase. The points can be saved up and exchanged for money off vouchers or used as payment for a later purchase. There is no credit scheme involved and they are purely an incentive to remain shopping at that store, hence the name.

A store card works like a credit card and could quickly get the owner into ever-increasing debt unless the balance is paid in full each month. However, unlike a credit card a store card can only be used in that shop, so you may find yourself with more than one store card and perhaps credit cards as well, making it harder to keep track of your spending.

To add to the confusion, many supermarkets are bringing out their own credit cards, emblazoned with their branding and offering rewards such as discount vouchers on purchases made in-store. Essentially these work the same way as credit cards (they have lower APR and can be used everywhere a regular card can), and they can be useful if you only shop at a particular supermarket chain.
If you're ever get tempted to get a store card, ask yourself::

1. Can I pay off the balance in full each month before the interest is added
2. Shop at that store often enough to justify getting the card (and is the discount really worth it)?
3. Is my credit rating good enough that I can get more credit out without it being affected?
4. Would a regular credit card be a better substitute?

Not sure of the answer to that last question? Price comparison sites like MoneySupermarket will allow you to compare all the major credit cards in the UK and see what benefits you could get from them. With the smart search facility you can also see what cards you're likely to be accepted for without leaving a mark on your credit file.