Stop and think before signing up for store cards

Mar 6 2010 By The Journal

A NEW free consumer advice guide on store cards has been produced by insolvency trade body R3 to keep consumers in the North East getting into financial trouble.

The guide, which can be downloaded from www.r3.org.uk,  is designed to show consumers how to make the most out of the store cards and how to avoid getting into financial trouble.

R3 has previously called for a ban on financially unqualified shop staff being allowed to promote store credit cards – a practice which it believes contributes significantly to the mountain of personal debt in the UK and can entice vulnerable customers into debt.

A recent survey of the organisation’s members showed that two thirds of them have dealt with insolvency cases where people have signed up for a store card without understanding what they had let themselves in for.

More than three quarters of those surveyed believe that consumers view spending on store cards as less “real” than spending in cash and so unwittingly go over budget.

Linda Farish, chairman of the North East arm of insolvency trade body R3 and director of recovery and insolvency at
Newcastle-based accountants RMT, says: “Store cards must be handled just like any other credit card, and offering store
credit at the point of sale means that many vulnerable consumers do not have the time or information required to grasp that they are entering into a legally binding contract.

“This advice guide is 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 potential customers that they:

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.